Nonprofit Merger As an Opportunity for Survival and Growth

MergeMinnesota Nonproﬁt merger as an opportunity for survival and growth

Ron Reed, Project ReDesign, MAP for Nonprofits

Susan Dowd, Library Strategies Consulting Group, The Friends of the Saint Paul Public Library Acknowledgments

After 30 years of being involved in some way We thank our Project ReDesign Advisory Committee with nonprofit mergers, our completion of for their support and guidance over the last two MergeMinnesota is like a dream come true. I hope years: the reader will find this work as useful as I found it rewarding to create. So many helpful hands and Emil Angelica, Community Consulting Group minds went into its production. I would like to Kate Barr, Nonprofits Assistance Fund thank everyone whom my limited space will allow. Ellen Brown, Community Volunteer Heidi Neff Christianson, Moore, Costello & Hart First, I am very grateful to MAP and its Executive P.L.L.P. Director Judith Alnes for giving me the opportu- Patricia A. Cummings, Jay and Rose Phillips nity to develop Project ReDesign. Her support and Foundation (retired) guidance throughout this pilot project have been Louise Dickmeyer, People Driven Performance immeasurable. Jacqueline Hill, Christensen Hill, Ltd. Elizabeth Johnson, Greater Twin Cities United Way I thank Susan Dowd, co-author of MergeMinnesota Steve Lassiter, Strategeries and a consultant for Library Strategies Consulting Ken Middlebrooks, Land O’ Lakes (Retired) Group, for her exceptional writing, editing and Sondra Reis, Minnesota Council of Nonprofits constructive advice throughout the development Carolyn Roby, Wells Fargo Foundation process. We are especially indebted to her for Scott Stankiewicz, Mutual of America her exemplary work on the Literature Search and Gretchen M. Stein, Ph.D., The Sand Creek Group Ltd. Review.

I thank Laura Ayers, consultant for The Center for We are immensely grateful to the following funders Organizational Development. Her thorough and that have provided ongoing support to Project thoughtful work on the Expert Interviews has ReDesign: added immensely to this project. The F.R. Bigelow Foundation I also want to acknowledge former Project The Otto Bremer Foundation ReDesign Director Suzanne Pearl, not only for her The Greater Twin Cities United Way work helping organizations merge during the first The A.J. Huss Foundation two years of our project, but also for her initial The John S. and James L. Knight Foundation writing and editing of the Merger Tool Kit. The McKnight Foundation The Medtronic Foundation My thanks to graphic designer Becky Andrews for Mutual of America using her fine talents to enhance the clarity and The Nicholson Family Foundation usability of this publication. The Jay and Rose Phillips Family Foundation The Saint Paul Foundation I would also like to take this opportunity to wel- The Tozer Foundation come Renae Oswald-Anderson, Project ReDesign’s The Wells Fargo Foundation new Director, to MAP for Nonprofits. I look for- ward to working with her as we expand this service to the community. Ron Reed, Consultant Project ReDesign I want to recognize La Piana Consulting for their MAP for Nonprofits extensive contribution in the area of strategic restructuring. Their leadership, consultation and written materials have proven invaluable to count- less nonprofit organizations that are considering This publication was made possible though gener- major reorganization. ous funding from The Wells Fargo Foundation and The Greater Twin Cities United Way. MergeMinnesota

Nonproﬁt merger as an opportunity for survival and growth

Ron Reed, Project ReDesign, MAP for Nonprofits

Susan Dowd, Library Strategies Consulting Group, The Friends of the Saint Paul Public Library

Contents Introduction 5 About this Publication 5 About MAP for Nonprofits 6 About Project ReDesign 7 What is Realignment? 8 Thinking about merger 11 The Pain is Deep 11 What is Merger? 13 Why Merge? 13 What Makes a Strong Merger Partner? 15 Common Merger Mistakes and How to Avoid Them 16 Project ReDesign’s merger model 19 Project ReDesign’s 10-Step Merger Decision-Making Process 19 Project ReDesign’s Merger Tool Kit 23 Merger implementation 35 Implementation Planning 36 Implementation Categories 36 Merger evaluation 37 Vignettes of nonprofit mergers in Minnesota 39 Two Charter Schools 40 Two Community Development Organizations 40 Two Nonprofits That Wished to Broaden Services 41 Two Organizations Providing Mental Health Services 42 Appendices 43 APPENDIX 1 Experts Interviewed and Interview Questions 45 APPENDIX 2 Literature Review 47 APPENDIX 3 Full Bibliography 67 Introduction

About this Publication

n April of 2007, MAP for Nonprofits launched Project ReDesign—a Ithree-year initiative to help nonprofit organizations with organizational realignment, including mergers, program transfers, joint operating agreements, joint ventures, parent-subsidiary relationships, and dissolution.

When we started Project ReDesign, we didn’t know that an economic downturn was around the corner and about to reduce every income stream on which nonprofit organizations rely. We didn’t know that the number of people in need would increase dramat- ically all across the community. And we didn’t know how many organizations would need to awaken to the notion that mergers might be the best strategic path to preserve the services they deliver to the community.

What we did know was that we wanted to help nonprofit board members and nonprofit executives see that mergers and other forms of realignment could be positive strategic opportunities to promote organizational sustainability and preserve services. This publication tells that story.

By familiarizing nonprofit leaders with the language and processes that accompany organizational realignment, we hope that this

5 foreign territory can become familiar and less forbidding. Indeed, we hope it strengthens awareness that realignment may be the nonprofit sector’s best hope to continue serving the community with fewer financial resources.

While we realize that organizations are working together in a variety of ways, such as sharing back-office functions, contracts for service, and formal collaborations, this publication primarily focuses on nonprofit mergers. It is the result of three major areas of experience and investigation:

1. The experience of MAP’s and Project ReDesign’s team of merger experts 2. Interviews with local and national experts in the area of nonprofit mergers 3. A search and review of current published literature about nonprofit mergers

The current economic environment and its challenges are inspir- ing many nonprofits to look at new ways of doing business, and merger is becoming an increasingly popular option. We hope that this resource will help readers begin to consider the benefits and complexities of nonprofit mergers and to view them, not as evidence of failure in the present, but as opportunities for success in the future.

Judith Alnes, Executive Director MAP for Nonproﬁts

About MAP for Nonproﬁts

MAP for Nonprofits has provided innovative, high-quality, cost- effective management consultation and support to Twin Cities nonprofit organizations for 30 years. In 1979, a group of leaders from area corporations and community institutions joined in recognition that the nonprofit sector needed more management help to build a vital and healthy community.

MAP’S Mission: MAP unleashes the power of the nonprofit sector in the community by increasing the capacity of individual nonprofit organizations to achieve their missions and by providing leadership for the effective management of the sector.

Today, MAP is a leading resource for management consultation and board recruitment for nonprofit organizations across the Twin Cities metropolitan area. MAP uses a combination of its own staff, community consultants and volunteers to help more than 500 Twin Cities’ nonprofits annually.

6 In January 2007, MAP teamed up with merger consultant Ron Reed, retired CEO of Family Service of Saint Paul, who brought extensive nonprofit merger experience to MAP. During his 28-year tenure at Family Service, five nonprofits joined that organization. Later, as an independent merger consultant, Reed helped several other Twin Cities nonprofit organizations merge. Reed was invited to join MAP’s staff and, together with MAP Executive Director Judith Alnes, they developed a comprehensive new service. Thus, Project ReDesign was born.

About Project ReDesign

Project ReDesign helps nonprofit organizations improve their sustainability through realignment, a term that describes many kinds of formal collaborations. These collaborations include full merger, as well as major organizational changes.

Project ReDesign encourages, guides and supports nonprofits that are considering realignment by: s Guiding a nonprofit organization through a continuum of merger options, such as merger, program transfer, joint ventures or parent-subsidiary relationships. s Providing resources and support to help a nonprofit organization think boldly, evaluate options, identify opportunities, communicate effectively and make sound decisions. s Offering a merger model that consists of a 10-Step Merger Decision-Making Process and a Merger Tool Kit for use throughout the merger process. Project ReDesign breaks the merger process into four phases: 1) Assessment, 2) Planning and Decision Making, 3) Implementation and 4) Evaluation.

Together, Project ReDesign and MAP have the expertise to assist with each and all of these phases of merger.

The funding challenges nonprofits have faced since 2001 have esca- lated to a firestorm today, and many nonprofits now must come to terms with their worst financial times ever. However, there are options for survival, and sometimes strength comes from combining the best of two or more organizations. Through merger facilitation, Project ReDesign and MAP can access the resources to help guide nonprofits through the firestorm and survive the financial and environmental heat.

7 What is Realignment?

“Realignment” is a broad term that describes multiple kinds of organizational collaborations. While it often serves as a strategy to address economic pressures, realignment is also a natural process that occurs as the nonprofit sector grows and matures. In some cases, realignments are pairings of relatively equal organizations; in others, smaller organizations are folded into larger ones. Occasionally, one organization assumes control of a second organization, but the two remain separate. In still other circumstances, assets are transferred from one organization to another. The kind of realignment that works best is determined on a case-by-case basis by merger consultants, working together with the leadership of the organizations. Below are brief descriptions of eight common realignment options.

1. Administrative consolidation: Restructuring that includes the sharing, exchanging, or contracting of administrative functions to increase the administrative efficiency of one or more of the organizations involved. Such functions may include accounting, human resources, information and technology systems, marketing and purchasing, among others.

2. Consolidation: Combining separate organizations into a single one. Consolidation differs from a merger in that a new entity is created in the consolidation.

3. Joint programming: Restructuring that includes the joint launching and managing of one or more programs to further the programmatic mission of the participating organizations. For example, a domestic violence shelter and a rape crisis services organization got together to form and manage a domestic violence offenders’ program, while continuing to operate their existing organizations and programs independently.

4. Joint venture corporation: An integration that includes the creation of a new organization to further a specific administrative or programmatic end of two or more organizations. Partner organizations share governance of the new organization.

5. Merger: The integration of all programmatic and administrative functions of multiple organizations, to increase the administrative efficiency and/or program quality of one or more of the partners. They can also integrate to increase geographic reach or achieve synergy between programs. Mergers occur when one or more organizations dissolve and become part of another organization’s structure. The surviving organization may keep or change its name. A merger also occurs when two or more

8 organizations dissolve and establish a new structure that “We are seeing an includes some or all of the resources and programs of the emerging trend of original organizations. world-wide scope 6. Parent-subsidiary: An integration that combines some of for nonproﬁts the partners’ administrative functions and programmatic and government services. The goal is to increase the administrative efficiency and program quality of one or more organizations organizations to work through the creation of a new organization(s) or desig- together.” nation of an existing organization(s) (“parent”) to over- see administrative functions and programmatic services of Peter Goldberg, other organization(s) (“subsidiary”). Although the visibil- President and CEO, Alliance for Children ity and identity of the original organizations often remain and Families intact in a parent-subsidiary relationship, some organizations involved in such restructurings consolidate to the point where they look and function much like a merged organization.

7. Program transfer: Occurs when one organization spins off or transfers administration of one or more of its programs to another organization.

8. Strategic restructuring: Occurs when two or more independent organizations establish an ongoing relationship to increase the administrative efficiency and/or further the programmatic mission of one or more of the participating organizations through shared, transferred, or combined services, resources, or programs. Strategic restructuring ranges from jointly-managed programs and consolidated administrative functions to full- scale mergers.

Thinking about merger

Nonprofit leaders have described the current “With financial economic environment as “the perfect storm.” pressures from all sides, coupled with increased demand Report, describes the The Pain is Deep for services stemming effect of the recession nce somewhat insulated against eco- on Minnesota nonprofits from unemployment Onomic challenges because of the strong as “unusually quick and and housing problems, and generous philanthropic community that sharp.” Revenues have many nonprofits will the Twin Cities enjoys, local nonprofits are decreased as expenses experiencing this crisis as intensely as those have increased despite be hard pressed to anywhere. It is not an exaggeration to call careful management. keep up the juggling.” the present time the greatest financial crisis The report recommends most nonprofits have ever known. that nonprofits be “nim- Kate Barr, Nonprofits ble and open to alter- Assistance Fund Government funding has been cut back natives.” It concludes, or eliminated, and corporate dollars have “Nonprofit organiza- shrunk. Individual giving has fallen dra- tions will need to make matically for many nonprofits. In December strategic choices about their own operations, 2008, the Minnesota Council of Nonprofits including reductions in staff, possible merg- (MCN) conducted a survey to better under- ers or even dissolution. And they will seek stand the effect of the economic situation to minimize negative impacts on the people on state nonprofits. The survey reached they serve.” nearly 2,000 member organizations. MCN wanted to learn how nonprofits are being Challenges are all too apparent on the giving impacted by the recession and how their ser- side as well. A 2009 Outlook Report released vices will ultimately be affected. The report by the Minnesota Council on Foundations on that survey, Nonprofit Current Conditions (MCF) in early January 2009 states that 40%

11 “This is not about big. of Minnesota grant mak- by organizations that assist with food, hous- This is about better.” ers anticipate a decrease ing, employment, human services and youth in giving in 2009. An development. The MCN survey report men- John Stumpf, President equal percentage expect tioned above describes the situation non- and CEO, Wells Fargo & Company their giving to remain profits are facing as “having to do less with flat. Foundation sup- less,” that is, feeling forced to scale back port will be affected into services because of revenue challenges. The 2010 and beyond due table below illustrates some of the MCN sur- to the use of multi-year vey findings. rolling averages to com- pute the funds available One result of organizational stresses has for grants. In an effort been a new awareness that “business as to assist nonprofits in usual” can no longer be assumed. Indeed, other ways, foundations and corporations tougher economic times have served as a are exploring broader methods of support, resounding wake-up call to many nonprof- such as increasing in-kind giving and offering its that have never before considered doing other non-monetary assistance. business differently, and merger is becoming an increasingly common strategy. The last And the greatest challenge of all? These decade has witnessed a surge in the num- changes have occurred during a time of ber of nonprofit mergers around the nation. increased demand for the services of nonprof- While hard data supporting this statement is its across the Twin Cities, state, and nation. hard to come by (the IRS does not track non- Results of the MCN survey indicate that profit mergers), anecdotal evidence from the 42.4% of nonprofits experienced increases in public sector overwhelmingly supports it as a demand for their services in 2008, increases national trend. There are more than 1.5 mil- that, in some cases, have proven difficult to lion nonprofits in the U.S. today, all of which satisfy. These increases were felt most acutely face an environment of fierce competition

MINNESOTA COUNCIL OF NONPROFITS CURRENT CONDITIONS REPORT (December 2008) 54.5% 49.2% 47.4% 42.4%

8.6% 7.6%

Decline Increase in Decline in Increase in Decline in None in total expenses individual demand for volunteers revenue contributions services

12 for shrinking resources. Clearly, the next few to deliver on their missions and increase the years are going to bring about real changes depth and scope of services they provide. By in the nation’s nonprofit universe. realigning staff, personnel can be allowed to specialize, maximizing strengths and In the true spirit of viewing challenge as eliminating the need for staff to operate as opportunity, nonprofits, including those in generalists. the Twin Cities, are examining a number of realignment options, including merger, as a Organizations that consider merger usually way to improve services and/or ensure sur- do so for several reasons: vival. Project ReDesign’s mission is to guide this examination and, if merger appears to To better pursue a mission and be the right course of action, to assist with deliver services more efﬁciently that transition. In the past five years, local nonprofit mergers have also accelerated at a Nonprofit organizations share a goal to pro- record pace, led by large national organiza- vide the best services in the most efficient tions such as The United Way, American Red manner possible and practice careful stew- Cross, Big Brothers/Big Sisters, scouting orga- ardship of their resources. When two non- nizations, and others. In fact, the Greater profits share a common mission and provide Twin Cities United Way (GTCUW) has sup- similar or overlapping services, they face the ported about two dozen mergers in the last problems of service duplication and con- five years through planning and/or imple- fusion in the eyes of clients and donors. mentation grants. Merging streamlines service delivery, elimi- nates duplication and waste, and solves this confusion of identities. What is Merger? To improve skill sets and grow A merger is the combination of two or more strategically separate organizations into one legal entity. Nonprofits are not created Program, administrative, and governance equal. They bring widely functions are all combined. different skill sets to their “Mergers are about communities. When two melding missions, Why Merge? nonprofits identify critical strengths in differing thereby allowing the Unlike nonprofit mergers of the 1970s and areas (service delivery and combined entity to 1980s, mergers in the last 15 years have fundraising, for example), pursue a common become increasingly values-driven, fueled they may decide to merge. purpose with greater largely by mission and common vision rather In that way, combining than by the financial crises that characterized their strengths—and, stability. Mergers nonprofit mergers in earlier years. Today, consequently, ceasing to become the ‘rebirth’ many nonprofits find they can take the best compete for funding dol- of an organization, of their respective programs, governance, lars—becomes the best management styles and organizational cul- way to expand their ser- rather than the death tures and create a new and more successful vices and pursue a vital of a mission. merged organization. In addition, mergers future for both. can strengthen the organizations’ abilities Dan McCormick, CEO, The McCormick Group

13 “A great percentage of mergers result in To improve the Look at the strategic, organizational, and ﬁnancial outlook financial questions below. Are they relevant an increased ability and improve to your nonprofit’s situation? If you can to deliver services sustainability answer “yes” to several of these questions, more broadly or more perhaps merger is an option worth further Merging can help a investigation: efﬁciently.” struggling nonprofit achieve a more even Bob Harrington, s Does your strategic plan call for adding Director, Strategic cash flow, gain access to or expanding services, including geo- Restructuring Practice, new capital, and fore- graphic or demographic expansion? La Piana Consulting stall potentially fatal collapse. A smaller non- s Are you looking for a way to gain new profit with a strong skills and/or improve your organization’s program but unsteady infrastructure? finances may see an s Are there services that you do not cur- advantage in merging rently provide that would be complemen- with a larger organization that has a solid tary or enhance your current services to funding base, but does not offer a program clients? comparable to that of the smaller organization. In this case, the smaller nonprofit’s s Are you losing a founder, an executive excellent program can continue with a better director, or experiencing other turnover likelihood that the costs of that program can at the executive level? be met. In addition, merging can enhance s Does your organization have a culture of the essential infrastructure of a nonprofit risk-taking, growth, or an entrepreneur- that has had to cut back on resources such as ial spirit? staff and technology. s Do you have close partnerships or alli- Merger, then is more than a life preserver for ances that might lead to merger? struggling nonprofits. It can also be viewed as a strategic option that can ensure con- s Does your organization sometimes tinuation and/or enhancement of services. A get confused with another, similar recent study, the Tropman Report, November organization? 2007, that asked participants why they con- s Is it difficult to recruit and/or retain sidered merger revealed that a majority did board members, or are your board mem- so “to increase their organization’s reach or bers burned out and looking to step back mission impact.” The community also bene- from their current levels of involvement? fits from well-planned and executed mergers that result in stronger services. Scarce resources can be used more effectively and efficiently, services can continue, and nonprofits can become more sustainable.

14 s Are you experiencing difficulty retaining What Makes a Strong Merger middle management and other key staff? Partner? s Have you had to reduce your infrastruc- Often, merger partnerships begin with some- ture, such as technology, marketing or thing very simple: a relationship. Out of that accounting functions? relationship emerges a conversation between s Have you experienced a steep increase in two (or more) nonprofits that may already overhead/administrative costs? know each other well, have worked together before (perhaps in joint programs), and value s Have you lost a funding source, or is this working with other organizations. Their con- likely in the near future? versation evolves into “merger exploration,” s Are your fundraising efforts inadequate to which refers to all the activities leading up to meet across-the-board organizational cost a board’s vote to complete a merger. increases? s Do you have a strong program component The most successful mergers grow out of but continuing challenges supporting it? previously-established relationships. s Are you annually budgeting uncommitted revenues? In the November 2007 Tropman Report: Nonprofit Mergers: An Assessment of s Are you continually losing potential dol- Nonprofits’ Experiences with the Merger lars to other nonprofits with similar Process, researchers found that in over half of services? the cases (57%), the potential partners had s Have funders indicated that they would “substantial involvement” with each other like to see your organization merge? Have prior to the merger exploration. Most fre- they offered to provide funding to do so? quently (75%), those relationships involved “a program alliance or collaboration.” This finding parallels an earlier Tropman study that found that “sustaining an even less formal collaborative project requires a strong level of awareness and trust between participating organizations.”

Interestingly, the 2007 Tropman Report also found that the majority of merger explorations result in a successful outcome, even if “Imagine new partners or those explorations don’t result in two orga- a merger, or a new way to nizations joining to form a new legal entity. deliver services.” In this study, merger explorations resulted in a formal merger in nearly three out of four Judith Alnes, Executive cases (71%); but for the 29% of organiza- Director, MAP for Nonproﬁts tions that did not merge, most viewed the merger exploration process as “worthwhile and helpful in further clarifying and reinforc- ing the missions of the organizations.”

15 Common Merger Mistakes 2. Underestimating the importance and How to Avoid Them of organizational culture As an organization evolves over time, it faces Project ReDesign’s experience, along with the challenges of integrating individuals into that of the experts and information from our an effective whole, while adapting effectively literature review told us that many of the dif- to the external environment. As the organi- ficulties encountered during the merger pro- zation finds solutions to these challenges, it cess fall into these categories: engages in a kind of collective learning that creates the set of shared assumptions and 1. Underestimating the importance beliefs we call culture. That culture informs of communication the style and practices of the organization, Communicate, communicate! Effective com- as well as its value system, and no two orga- munication sets appropriate expectations, nizations share exactly the same culture. maintains credibility, and reinforces good Evidence overwhelmingly shows that culture will among staff and supporters during all can be among the most difficult aspects to phases of the merger process. Having a care- align. Failure to integrate cultures and, in ful, strategic communication plan in place fact, to create a new culture that works for will help reduce both internal and external everyone, can derail the merger process. resistance and manage fears about job loss, salary reductions, changes in supervision, Understanding and melding two distinct and other alterations that workers feel are beyond their control. Without such a plan, organizational cultures is a top priority. it can be difficult for employees to view the merger in a positive light. Rumors will spring Therefore, investigation that results in the up, and some individuals’ natural tendency acknowledgment and understanding of to become “territorial” will become evident. each party’s organizational culture must be High levels of communication are important included whenever merger is under consider- even long after the merger has closed. Poor ation. Where cultures are dissimilar, experts communication at any phase of the pro- advise creating an intentional process for cess can derail success determining what culture is desired, then tak- as quickly as any other ing specific measures to create cultural cohe- aspect of this complex sion for the newly-merged board and staff. undertaking. When cre- “The leadership has to ating messages and dis- motivate the staff to seminating information, buy into it. Finally, it it is imperative that merging organizations will be individual staff prevent misinformation members who have to and drama. do this work.”

Emmett Carson, President and CEO, Silicon Valley Community Foundation

16 3. Underestimating the timeline By underestimating or underfunding the real costs of a merger, too many nonprofits and A timeline, first and foremost, must be realis- funders pay the price later in discord, dis- tic. Mergers will always be more complicated tractions and drama, along with the loss of and take longer than the parties presume valuable time, money and good will. In addi- when entering into the process. It typically tion, when it is assumed that cost savings will takes 9-18 months to successfully negotiate a result and they do not, merging organiza- merger, although some mergers require even tions and funders become disillusioned and more time. If the merger timeline becomes consider the effort unsuccessful. As a result, elongated due to ineffective management of an organization can ultimately lose fund- the process, consulting costs will rise, such as ing as a direct result of the merger, thereby those for legal and financial due diligence. creating a significant disincentive for other organizations to explore merger. Involving middle management and staff, not just the board and executive, is important. While mergers may start from the top and Funders play an important role work down, they must be successful from the Enlisting the help of the funding community ground up. is essential when going through a merger because the cost of the merger process can 4. Underestimating costs be a huge obstacle to the very organizations that might benefit from it the most. Funders Hard costs most frequently underestimated can provide direct assistance to organizations include the costs for facilitation, legal advice engaged in restructuring by offering work- and filings, cultural assessments, human shops and incentives, training consultants, resource audits, communications and print- and by providing direct financial support. ing, web content and redesign, signage, and additional infrastructure and/or technology. Nonprofits also underestimate the increased Mergers almost always cost more and take and accrued human resource benefits/costs, longer than anticipated. along with rent increases and other changes in their leasing contracts. The experts interviewed by Project ReDesign In addition to hard costs, there are opportu- included an individual from the Twin Cities nity costs that must be considered, and these who told us, “Foundations are in a unique can be significant. It is easy to miss funding position to be able to see overlaps between and other opportunities when an organiza- nonprofits across sectors and issues. They can tion is inwardly-focused. Organizations must share knowledge across foundations, from attend to external opportunities while going the staff to the board levels via the Minnesota through the merger so that competitors can- Council of Nonprofits (MCN) and Minnesota not gain an advantage in community buy-in Council on Foundations (MCF). They can cre- and funding. ate a joint approach that draws upon their respective giving priorities and strategically contributes to a community-wide strategy.”

17 The experts we interviewed offered a num- mergers, because they are complicated, con- ber of specific recommendations for funders. fusing, and highly-technical, require the assis- They recommend that funders consider the tance of an outside expert, a consultant, who following strategies: will help develop this plan. The consultant will facilitate each step and assist the organiza- s Bring organizations together in one place tions in avoiding the pitfalls, like those listed and create shared goals and guidelines. above, that threaten to derail the process and/ or greatly increase the cost. A capable consul- s Collaborate with other funders to create tant will set the right tone from the begin- an effective environment that promotes ning (what can be accomplished together) exploration and avoids disincentives to and right the balance between agencies of merge because of a fear of losing fund- differing perceived and/or actual financial ing potential. power. In addition, the external project management and facilitation that the consultant s Create a “pool” of funding that supports provides frees organizational leaders to focus Project ReDesign’s efforts as an incen- on what is right for the social purpose of their tive to create capacity improvements in nonprofit and lessens turf battles. mission delivery. This would be a Phase II effort for Project ReDesign to add to the (currently) relatively small universe of knowledge about mergers, and to provide access to a valuable option. s Consider structuring loans (or supporting agencies that provide nonprofit loans, critical junction financing, and/or program-related investments [PRIs]). s Support Project ReDesign in presenting more educational opportunities to learn about strategic options.

5. Underestimating the complexity of the merger process

Careful planning cannot be overemphasized, and for a nonprofit merger to be successful, it is essential that leadership put a structured plan in place early in the process. This plan will include executive and name identification, due diligence, board and governance structure, integration of staff and systems, communication, analysis of organizational cultures, and legal and financial considerations. Most

18 Project ReDesign’s merger model

Who makes the decisions about a merger?

he assessment, planning, and decision- Project ReDesign’s Tmaking phases of the merger process 10-Step Merger Decision- require a carefully structured plan and professional guidance. Project ReDesign’s experi- Making Process ence in merger assessment and track record MAP’s plan outlines ten distinct steps to with the complex negotiations and decision- the merger process. These steps are linear making that follow an agreement to explore and involve the development of a leader- merger has led to the development of a ship team that drafts initial documents, a Project ReDesign model. The model that fol- joint committee that reviews and approves lows consists of two important pieces: those drafts, and legal reviews that result in an eventual recommendation for merger. s Project ReDesign’s 10-Step Merger At that point, work begins on drafting the Decision-Making Process actual Plan of Merger and seeing that Plan s The Merger Tool Kit—specific tools and through to approval and legal filing. recommendations for completing the This 10-step process developed by Project 10-Step Merger Decision-Making Process ReDesign combines the expertise of merger consultants with those who know the organizations best, their leadership.

19 STEP 1 Common Understandings examines founda- Initial assessment meeting with tional issues, any one of which might be a executive directors and/or board deal breaker. For example: chairs s Which organization will survive? While partnerships may begin with conver- s What will the newly-merged nonprofit sation, they quickly require a more formal be named? process in order to advance. An initial assessment meeting involving key leaders (execu- s How will the newly-merged nonprofit be tive directors and board chairs) from both governed (board and membership)? nonprofits, along with Project ReDesign’s s How will executive leadership be expert merger team, is intended to move the determined? discussion to a deeper level. Its purpose is to begin to articulate the likely advantages and s How will financial challenges be met challenges of a merger, and to determine its (including the cost to implement the potential for success. At that meeting, par- merger)? ticipants look at their organizations’ histories s How will the success of the merger be and their experience of working together. measured? How strongly have they collaborated in the past? How successful have those collabora- In addition, the leadership team will begin tions been? Can they articulate a vision for “Making the Case” for merger, utilizing this a merger? Are they ready to provide leader- document in the Merger Tool Kit as well. In ship for the merger process? drafting MAP’s Making the Case document, the team will take up the details and hard STEP 2 questions that are intended to reveal the Leadership team meets to develop initial complexities, strengths, and possible pitfalls drafts of “Common Understandings” and of a merged organization. With this draft, “Making the Case.” they will begin creating the framework for the merged organization. In order to do so, The leadership team members will include they will have to address questions such as: the executive directors and possibly the board chairs who took part in the initial s What will this new organization’s vision assessment meeting and mission be? with Project ReDesign’s merger experts. This s How will it promote excellence? “Mergers are becoming team will function as the s What new markets and services might a strategic option workhorse. Its charge will merger open up? be to draft a document for dealing with the MAP calls “Common s How will economies of scale be realized? nonproﬁt management Understandings,” one s Why is this the right time to merge? challenges of the 21st of the key tools in the Merger Tool Kit. s How will the community benefit? century.” s How will funders benefit? Thomas McLaughlin, Adjunct Lecturer, s How will the newly-merged organization The Heller School benefit? for Social Policy and s How are these two organizations alike? Management, Brandeis University s In what ways are they different?

20 STEP 3 STEP 5 Each board of directors passes Legal review of both organizations is resolution to “intend to merge” conducted. and appoints members to a joint committee. The purpose of this step is to focus on potential legal issues that might shape the merger Board voting can take time, but the pro- process and/or the merger itself. Merger is, cess is aided by the work the leadership by definition, a legal process whereby one team will have done in developing the first organization is legally dissolved while the drafts of the “Common Understandings” and other survives. Occasionally, both organiza- “Making the Case” documents. These docu- tions legally dissolve and form a new legal ments will help board members understand entity. the advantages and potential difficulties of merging, and they help pave the way toward In order to further assist the governing understanding and a vote to further explore boards of the merging organizations deter- merger. Once this “intend to merge” vote is mine whether to recommend merger, due complete, the boards will assemble a joint diligence reviews must be undertaken. committee. While the leadership team’s job is One nonprofit merger attorney and author to develop a plan, the joint committee serves describes this step as a kind of “legal audit.” as an oversight committee for the plan. Merging nonprofits begin conducting a comprehensive examination of the other party’s STEP 4 legal status and risk—incorporation, contracts, claims or litigation, human resources, Joint committee meets as needed benefits, real estate, etc. A “Due Diligence to review and approve “Common Checklist for Minnesota” is included in MAP’s Understandings” and “Making the Merger Tool Kit. It outlines the major areas Case.” for legal review. The completion of this The joint committee is usually made up of checklist will ultimately require the profes- the leadership team, plus two or three mem- sional services of an attorney experienced in bers from each organization’s board of direc- nonprofit law. tors. This committee’s job is to use the early drafts of the “Common Understandings” STEP 6 and “Making the Case” documents to work Joint committee presents out the smallest details of a possible merger. recommendation for merger, based The joint committee may send both docu- on “Common Understandings” ments back to the leadership team to refine and “Making the Case,” to boards as needed. Eventually, these documents must of directors. Boards approve be finalized so that they can be presented to recommendation. both boards of directors for those directors’ formal vote on whether or not to recom- The joint committee’s hard work culminates mend merger. at this step, the point of decision, to formally recommend merger or not. Sometimes both boards meet simultaneously for this vote, although this is not always possible. One nationally known nonprofit merger consultant recommends that, in a situation where

21 one board might be more reluctant to pro- The Plan of Merger also sets forth new ceed than the other, the reluctant board Articles of Incorporation and Bylaws. It may should meet first, to spare the other board also contain other directives, such as specifi- the embarrassment of being “left at the cations of initial directors and their terms of altar.” If both boards approve a merger rec- office. ommendation, developing a Plan of Merger will be the next step in the process. STEP 8 Each board of directors approves the STEP 7 Plan of Merger. The Plan of Merger is drafted. The Plan of Merger is the formal legal docu- The “Plan of Merger” is a legal document ment developed above. Ideally, both boards that eventually will be submitted to the should approve the Plan within 45 days of its Secretary of State. completion in order to prepare it for submis- sion to the Secretary of State. It outlines the terms and conditions of merger, addressing: STEP 9 s When the merger takes effect Membership approves the Plan of Merger. s Which organization survives In the case of an organization that has a vot- s What the new organization will be ing membership in addition to a board of named and where it will be located directors, its membership must also approve s How the new organization will be the Plan of Merger. governed STEP 10 It specifies how financial resources will be Submit legal ﬁlings. managed, such as: The combined organization’s attorney will s What will become part of the new orga- handle all legal filings and the transfer of nization’s general operating funds assets. Minnesota requires that, if both s What is restricted merging organizations are 501(c)(3) nonprofits, the combined organization’s Articles s What happens to assets and liabilities of Incorporation must be filed with the s How gifts and grants will be transferred Secretary of State’s office. If one of the merg- to the new organization ing organizations is not a 501(c)(3) nonprofit, an additional step must be taken: a notice of merger must be filed with the State Attorney General’s office. (Articles of Incorporation are still filed with the Secretary of State.) “Even before the ink has dried on the merger documents, celebrate! Celebrate as boards, staffs, leaders, and a community. Celebrate and hail the good work of the organization and the people who brought to fruition a good and valuable effort”

Louise Dickmeyer, People Driven Performance

22 Project ReDesign’s Merger Tool Kit

Mergers are not a new phenomenon. Many process, it is important Minnesota nonprofits have merged through- to remember that merg- Merger out their histories, sometimes multiple times. ers require a strategi- Tool Kit MAP developed a list of Minnesota nonprof- cally structured process. ' its that have merged in recent years and was As one expert stated, interested to discover more than 50 merg- “They are not for do-it- ers on the list. Clearly, mergers have been, yourselfers.” In fact, this and still are, part of the fabric of Minnesota is a point on which most nonprofits. experts agree:

Mergers are complex undertakings with Largely through the efforts of Project many points of challenge and potential fail- ReDesign, MAP for Nonprofits has devel- ure. They are almost always time-consuming, oped seven proven tools that accompany the both the length of time required to complete 10-Step Merger Decision-Making Process. a merger, and the amount of time that board These tools make up Project ReDesign’s and staff must devote to the undertaking. In Merger Tool Kit and help guide the non- addition, they can be costly. Mergers entail profit merger process from initial dialogues many one-time costs, everything from legal through the approval of a merger plan and fees and letterhead to the integration of the filing of all legal documents required to multifaceted technology. complete the transaction in Minnesota.

Individuals involved in merger planning frequently describe the process as a “roller Most successful mergers require a clear plan coaster ride.” One day everything looks and the aid of competent outside assistance. smooth; the next day it seems to fall apart. Common struggles include agreeing on a new board structure, leadership, headquarters site, and even the merged organization’s name. To minimize the ups and downs of the

“Getting to and through mergers isn’t easy. Institutional leaders have to give up some institutional pride and control to make them work.”

Scott Russell, author of Putting Good Will to the Test, MinnPost. (&4C com, June 23, 2008

23 TOOL 1 Merger Best Practices

These guidelines help ensure that the merger process is conducted with the highest standards.

s Focus on mission and the best interest of those we serve.

s Create a clear vision that will guide the newly-merged organization.

s Involve people who will be affected in the process.

s Create a strong board and solid staff leadership.

s Deal with key issues early and directly (use “Common Understandings”).

s Pay attention to organizational culture and integration issues.

s Involve outside consultants and attorneys who have experience in nonprofit mergers.

s Have a clear, organized decision-making process (a merger model).

s Develop a communications plan.

s Have a realistic funding plan.

s Have a recommended date for merger completion.

s Have measurements in place to determine merger success.

“Many nonproﬁt board and staff leaders are exploring merger in order to best meet the needs of their community, their organization and those they serve.”

Ron Reed, Consultant, MAP for Nonproﬁts, Project ReDesign

24 TOOL 2 Common Understandings

“Common Understandings” are the most basic agreements that must be addressed early in the discussion/negotiation process. While every potential merger brings with it different circumstances and a variety of Common Understandings, certain questions are basic to all merger discussions. Upon these Common Understandings rest the eventual recommendations to the board and the future of the merger.

1. What is the vision for the merger? 3. What will the new organization be named? This question does not ask what the vision This deceptively simple question is often one of a merged organization will be. Instead, it of the most emotional. An organization’s asks what vision will guide the merger pro- name, like a person’s name, is an integral cess. What will a merger mean to both orga- part of its history, reputation, and identity. nizations? How will it affect programs and While the issue of a name does not have service delivery? How will joining together to be definitively resolved as part of the benefit the community? How will it benefit Common Understandings, each organiza- funders? tion must recognize at this early stage that the new post-merger board will immediately For example, when a nonprofit family ser- wrestle with this decision. Sometimes the vices agency merged with one that provided surviving organization’s name becomes the adoption services, the vision for the merger name for the new organization. Sometimes was that “the enhanced excellence of a com- the newly-merged organization assumes a bined child and family serving agency will new name completely. Often the question benefit the community and those we serve.” of a name occupies the new board members for some period of time after the merger is 2. Which organization will be the survivor finalized. and which will be dissolved? In most nonprofit mergers, one organization 4. How will the new organization be is folded into another one. One is dissolved; governed? the other survives. Occasionally, both individ- The composition of the new board of direc- ual nonprofits dissolve and become one new tors must be determined early in the merger organization. In a third scenario, a parent- negotiation process. In many merger cases, subsidiary relationship is formed whereby the new board of directors is formed by join- the parent organization controls the sub- ing the two boards into one. This is the opti- sidiary through governance, but they do mal solution in most circumstances. not formally merge into a single combined nonprofit organization. Project ReDesign’s In other cases, an optimal board size is merger experts can evaluate each potential agreed upon, and the bylaws are amended partnership situation and help the nonprofits to reflect this directive. (For example, there determine which course of action is the best might be three board openings available to in their circumstances. the directors of the dissolving organization.) Occasionally, organizations develop an advisory committee structure.

25 5. What will the membership criteria be for The number of staff hours required to take the new organization? a merger from exploration to completion is This step is a point at which both boards often overlooked or not calculated when can review the effectiveness of their cur- determining merger expenses. Mergers rent membership policies and practices and require not only the executive director’s time, decide how they will proceed in the future. but also that of the management team, sup- Some organizations may find that having port staff and others. additional members may not be in their best Some of the areas that must be considered interest. when determining potential merger costs are:

6. How will the executive director be s Public Relations and Marketing determined? s Technology Integration Determining an executive director is a critical s Human Resources first step in the merger negotiation process. In fact, it is one of the most important deci- s Accounting Integration sions to be made. In many cases, the execu- s Facilities Management tive director of the surviving organization becomes the leader of the newly-merged s Fundraising organization. Whatever the decision, it is s Program and Staff Administration extremely important that merger planners do not proceed very far until they have a s Consulting Fees process in place for determining executive leadership. 9. What will the timeline for the merger process be? 7. Where will the new organization’s A timeline is a crucial roadmap for the merger headquarters be located? process. It is important that a timeline be real- Location and other physical space issues must istic. While both organizations would like also be part of Common Understandings. to see negotiation progress smoothly and Often, all staff will be combined in the swiftly, that rarely happens, even in the best offices of the surviving organization. In other of circumstances. circumstances, a new headquarters location Among the decisions that dictate the merger will be required. timeline are the frequency of joint committee meetings, the merger communication plan, 8. What will a merger cost? and the target merge date. The cost of a merger depends on the size All the literature on nonprofit mergers and all of the organizations, the complexity of the the experts who have expressed an opinion realignment, the ability of staff and lead- on merger timelines agree: mergers almost ership to take on extra work, and many other factors. Project ReDesign can pro- always take longer than anticipated. vide cost estimates on a case-by-case basis. Usually, because mergers can be costly, third party funding is required to see the process through to completion.

26 TOOL 3 Making the Case This tool takes the organizations to a deeper level of thinking. It requires both organizations to articulate the vision for the merger, the reasons, and the internal and external benefits of merging. It also requires that both look closely at their similarities and differences. These extend beyond the obvious compatibilities such as programs and funding to their histories, their stewardship of community resources, their work ethics and their willingness to take risks.

The questions below are intended to guide s To achieve positive outcomes potential merging partners through a deeper ż Increased effectiveness level of articulation. They examine the vision for the merger, established as part of ż Better service delivery Common Understandings and ask the ques- ż Expanded programs tion, “Why merge?” ż Economies of scale ż Sharing administrative functions and costs 1. Why merge? ż Elimination of duplicate services The reasons for merging will differ from one nonprofit organization to another, but some ż Greater visibility and influence common reasons for merger are: ż The opportunity to affect public policy s To promote excellence ż The potential to increase resources ż The ability to engage in valuable ż Retain and attract talented staff partnerships ż Increase the ability to support and rec- ż The ability to measure effects and ognize staff merger success ż Provide opportunities for networking and building expertise 2. Why merge now? s To align with an overall business strategy Timing may not be everything, but in merger, as in many other endeavors, it is extremely ż Increase volume and/or capacity important. Some reasons for timing of a ż Reach new markets (geographic, demo- merger might be: graphic, etc.) s Because the community needs span an ż Provide new services and programs organization’s geographic boundaries. ż Increase the potential to raise financial s Because combining forces provides poten- support tial for stability and growth in meeting s To achieve financial stability current and emerging needs. ż Achieve economies of scale s Because funders expect nonprofits to consider merger as a way to reduce dupli- ż Build infrastructure cation of services, provide economies of ż Survive in a competitive funding scale, deliver services more efficiently, and environment bring them the best possible return on their investment in the community.

27 s Because when the economy picks up, 4. How can organizational compatibility be workforce issues will be a priority. A assessed? merged entity will be more attractive to Organizations whose cultures are collabora- potential employees and promote better tive lend themselves to the most successful retention. mergers. Compatibilities are relatively easy to assess. Some examples of characteristics 3. Who beneﬁts? that help indicate compatibility are: When two or more nonprofit organizations s Parallel history with similar mission, val- merge, the effects of that decision have both ues, and commitment to service internal and external impacts. Internally, the s Similarity in board structure and function management, culture and work environment may change. Externally, the community and s Solid reputation as professional, responsi- funders will be impacted by nonprofit merg- bly-managed organizations ers. Possible benefits may include: s Accountable, solid financial condition s Staff s Investment in technology ż Room to be creative s Similar funding streams ż Enhanced career opportunities s Compatible programming s Similar accreditation standards s Community

ż Greater geographical accessibility and 5. What is organizational culture? professional expertise Culture is everything that surrounds the ż More partnerships with other agencies, workplace—the values, attitudes, behaviors employers, and government programs and artifacts define and significantly influ- ż Expanded public policy initiatives that ence how an organization operates. Merger support community needs partners each have their own culture. The ż Stronger organization due to goal is to create a new one together. collaboration Organizational culture is sometimes over- s Funders shadowed by financial, legal, programmatic and staff issues when nonprofit merger ż Combined, efficient fundraising effort exploration is undertaken, but its impor- ż Expanded geographic and program tance should not be underestimated. It has reach of dollars contributed the potential to make or break the merger. ż Combined resources and expertise

“A well-executed merger of two organizations with complementary missions, values and strengths can achieve economies, efﬁciencies and synergies that few organizations can achieve alone.”

Ron Reed, Consultant, MAP for Nonproﬁts, Project ReDesign

28 TOOL 4 Due Diligence Checklist for Minnesota ( Due diligence is a critical step that examines a potential merger partner’s structure, policies, filings, and other legal matters that could derail the merger process.

Due diligence is a kind of “legal audit” that 3. Research any outstanding liens, requires full disclosure, followed by an objec- lawsuits, liabilities of the other tive evaluation of any financial or legal risks organization, which could include: of combining the two (or more) organiza- Worker’s Compensation Insurance tions. One nonprofit merger attorney who writes extensively about this subject says Other employee claims (OSHA, EEO, quite simply, “Due diligence offers protec- unemployment, etc.) tion.” A key reason for a careful due dili- Directors and Officers Insurance (or lapse gence review is to avoid personal liability on thereof) the part of directors or others involved in Outstanding lawsuits or possible lawsuits negotiating a nonprofit merger. It requires involving the organization the counsel of an attorney experienced in nonprofit mergers. 4. Determine whether the other organization has completed the This checklist below is intended to cover most required ﬁlings and notiﬁcations to of the legal aspects of merger. It lists docu- government regulators. ments that must be filed with the State and Federal governments, points out internal and IRS 990 forms for three (3) previous years external issues that could affect either orga- Annual renewals with Minnesota nization’s ability to merge, and examines the Secretary of State financial situation of each (although it is not Annual Attorney General reports (if an audit). required) Program licensing 1. Review governing structure of the Government grant reports other organization.

Articles of incorporation 5. Examine ﬁnances of the other organization. Bylaws IRS Determination Letter Review funding sources 1023 Application Form Government funding Corporate and foundation support 2. Review internal policies of the other Individual donors organization. Grant requirements Personnel policies Common donors Operations/financial policies and Review financial information procedures (identify organization’s Audits certified public accountant and other Current financial statistics outside professionals) Board financial policies Insurance policies

29 & TOOL 5 Sample Conﬁdentiality Agreement This Sample Confidentiality Agreement between MAP and its merger clients protects information that must be kept private.

Conﬁdentiality Agreement

It is understood and agreed to that the below Nonprofits; (c) is rightfully received by MAP identified discloser of confidential information for Nonprofits from a third party not owing a may provide certain information that is and duty of confidentiality to the Discloser; (d) is must be kept confidential. To ensure the pro- disclosed without a duty of confidentiality to tection of such information, and to preserve a third party by, or with the authorization of, any confidentiality necessary under patent Discloser; or (e) is independently derived by and/or trade secret laws, it is agreed that MAP for Nonprofits.

1. The Confidential Information to be disclosed 4. This Agreement states the entire agreement can be described as and includes: between the parties concerning the disclosure Invention description(s), technical and busi- of Confidential Information. Any addition or ness information relating to proprietary ideas modification to this Agreement must be made and inventions, ideas, patentable ideas, trade in writing and signed by the parties. secrets, drawings and/or illustrations, patent 5. If any of the provisions of this Agreement are searches, existing and/or contemplated prod- found to be unenforceable, the remainder shall ucts and services, research and development, be enforced as fully as possible and the unen- production, costs, profit and margin infor- forceable provision(s) shall be deemed modi- mation, finances and financial projections, fied to the limited extent required to permit customers, clients, marketing, and current or enforcement of the Agreement as a whole. future business plans and models, regardless of whether such information is designated as WHEREFORE, the parties acknowledge that they “Confidential Information” at the time of its have read and understand this Agreement and disclosure. voluntarily accept the duties and obligations set forth herein. 2. MAP for Nonprofits shall limit disclosure of Confidential Information within its own orga- On behalf of MAP for Nonprofits: nization to its directors, officers, partners, members, employees and/or independent con- Name (Print or Type): tracts (collectively referred to as “affiliates”) having a need to know. MAP for Nonprofits Signature: and affiliates will not disclose the confidential Date: information obtained from the discloser unless required to do so by law. Discloser of Confidential Information: 3. This Agreement imposes no obligation upon MAP for Nonprofits with respect to Name (Print of Type): any Confidential Information (a) that was in Signature: Recipient’s possession before receipt from Discloser; (b) is or becomes a matter of pub- Date: lic knowledge through no fault of MAP for

30 TOOL 6 Plan of Merger

This tool provides a template for a Plan of Merger that must be 4 completed in order to fulfill the legal requirements in the State of Minnesota.

Plan of Merger by and Between

______AND ______

This shall constitute the Plan of Merger by and between X Agency, a Minnesota nonprofit corporation, and Y Agency, a Minnesota nonprofit corporation ( Y or sometimes referred to as the “Surviving Corporation”), pursuant to Minnesota Statutes, Chapter 317A.

Terms and Conditions of Merger 1. EFFECTIVE DATE. The merger will be effective at 12:01 a.m. on (Date)

2. SURVIVING CORPORATION. Y Agency shall be the Surviving Corporation upon the accomplishment of this merger.

3. NAME. The name of the Surviving Corporation shall be “______.”

4. REGISTERED OFFICE/LOCATION OF CHARITABLE ACTIVITIES. The registered office of the Surviving Corporation will be ______, and the charitable activities of the Surviving Corporation will be conducted at ______, and at other locations designated by the Surviving Corporation.

5. GOVERNANCE. 5.1. Board of Directors. The Surviving Corporation will be governed by a Board of Directors consisting of not less than ___ directors. The initial directors and their terms of office shall be as set forth on Exhibit A.

5.2 Officers. The Surviving Corporation shall have the following officers: Chair, Vice-Chair, President, and Secretary/Treasurer. The initial slate of officers shall be as set forth on Exhibit B. Officers of the Surviving Corporation shall serve for a term of one year.

5.3. Members. The Surviving Corporation shall have no members.

6. FINANCIAL RESOURCES AND MANAGEMENT. A. General Operating Funds. All financial resources of X Agency and Y Agency will be merged. All revenues from fees for service, donations, and grants, as well as interest from investment accounts and reserves will become part of the general operating funds of the Surviving Corporation, at the time of the merger and thereafter.

31 B. Restricted Funds. Any restricted funds (those designated by the donor for a specific purpose) will remain so. Any funds restricted by the Board of Directors will be considered to be unrestricted assets to the extent provided under generally accepted accounting principles.

C. Assumption of Assets and Liabilities. The Surviving Corporation will assume all of the assets and liabilities of X Agency and Y Agency, whether now known or hereafter determined.

D. Gifts and Grants. All gifts or grants, including but not limited to any bequest or devise under any trust or Last Will and Testament, made before or after the effective date of this merger to either X Agency or Y Agency shall inure to the benefit of the Surviving Corporation.

7. ARTICLES OF INCORPORATION. The Articles of Incorporation of the Surviving Corporation, including all amendments proposed as part of the merger, shall be as set forth in the Articles of Incorporation of Y Agency, attached hereto as Exhibit C.

8. BYLAWS. The Bylaws of Y Agency, as set forth on the attached Exhibit D and hereby incorporated by reference, shall be the Bylaws of the Surviving Corporation.

9. APPROVALS. This Plan of Merger is conditioned upon the approval of the Plan of Merger by a majority of the directors of X Agency and by a majority of the directors of Y Agency.

32 TOOL 7 Filing and Notiﬁcation Requirements C Tool 7 is a checklist outlining the steps necessary to complete the legal filing for two common kinds of realignment options, asset transfer and merger. The Minnesota Secretary of State requires that specific documents be filed once both organizations’ boards have agreed to merge.

Asset Transfer Merger plan approved by both boards Develop list of assets for joining organization Consider audit/books review of both organizations Decide whether joining organization will dissolve or go inactive If dissolution: Follow statutory dissolution process Publish notice of merger If inactive: Create internal protocols for maintaining inactive status, both 501(c)(3) and MN registration Discuss role/duties of board during inactivity Who will keep up annual filings/registrations? Transfer assets to surviving organization

Merger Plan of Merger approved by both boards. Elements include: Names of corporations merging Name of surviving corporation Terms/conditions of proposed merger Manner and basis of converting memberships into surviving corporation Amendments to Articles of surviving corporation If organizations are other than 501(c)(3), file notice of merger with MN Attorney General’s office Publish notice of merger File Articles of Merger with MN Secretary of State. Elements include: Plan of Merger Statement that plan has been approved by boards of both organizations Statement that notice (if required) has been given to Attorney General File Articles of Merger with MN Secretary of State: Secretary of State returns Certificate of Merger Submit notice of merger to IRS

Merger implementation

The goal is to build a new culture together. “Understanding the challenge to personnel in any integration is really important.” t is often said that once two organizations One of the crucial areas Ihave merged, the real work begins. This is that can make or break Emmett Carson, true in many cases because integrating two the implementation of a President and CEO, Silicon organizations can often be more time-con- merger is the melding of Valley Community suming than the merger negotiation process. organizational cultures. Foundation It is essential, therefore, to develop a clear Merger partners each plan for the Implementation phase of merger. have their own cultures, There are many questions to be answered. the values, beliefs, norms Who will make the decisions? How will staff and ground rules that at all levels be involved in the success of the define how an organiza- merger? What systems must be integrated? tion operates. Cultural How will communication be handled? How issues include: will funds be raised? s The heroes The Project ReDesign Team leverages the s The business environment/strategy expertise of MAP staff to answer these kinds s The kind of skills that are valued of questions. MAP can provide nonprofit s The ongoing rites and rituals legal consultation, governance training, lead- s The style of the staff ership and organizational coaching, strategic s How information is communicated and business planning, marketing and commu- shared nications, financial analysis and technology s The structure: hierarchical or flat assistance. MAP can offer as much assistance in the merger implementation phase as an s The core values organization requests. s Views of the future s Decision making: formal/informal s The management style

35 No two nonprofit mergers are alike, but Finance and Operations Integration there are some issues that commonly arise Determine transfer of assets in merger implementation. Use the checklist below to determine what issues should Conduct final audit of merging be examined and what decisions will be organizations required in order to implement a merger. Integrate financial and accounting systems Integrate finance and operational Implementation Planning policies Integrate technology systems (internal, Transition Plan website, databases) Create a Merger Transition Team to Integrate/update insurance policies address merger implementation tasks. (workers comp, directors and officers This Team will be responsible for insurance) developing an Implementation Plan and Integrate/update any licenses, a timeline. It will be responsible to the registrations (e.g. lobbying) newly-formed Board of Directors or, if Programming Integration there is an extended interim period, to the Joint Committee. Determine short- and long-term program priorities Long-term Plan Develop joint operational budget During the first year following merger, Develop individual program budgets the new Board of Directors should: Create an internal structure to Develop a strategic plan coordinate and integrate programming Create a fund development plan activities Undertake Board integration and Board Communications Plan development activities and training Develop a post-merger (and interim, if Implementation Categories necessary) communications plan for the following stakeholders: Staff Integration Grantors (foundations, corporations, government, etc.) Develop an integrated staff structure Individual donors Develop job descriptions for new and changing positions Employees Centralize personnel files Clients Integrate pay scales and benefits The public/the media Integrate personnel policies (evaluation Program partners and other and performance management, paid stakeholders time off and vacation days) Develop a marketing plan for the Develop a plan for new and shared newly-merged organization office space Branding, logo, letterhead Advertising

36 Merger evaluation

How do we measure the success of mergers?

hile for-profit mergers can be evalu- of people served. But mergers of nonprof- Wated against a bottom line, nonprofit its make an impact beyond finances. They merger evaluation is difficult at best, and affect people, communities, and society. sometimes nearly impossible. These effects are complex and difficult to quantify. There is no sector-wide metric Nonprofits must ask, “Do we serve our con- tool in use, and scholars seem to be bypass- sumers more effectively and as efficiently as ing developing merger metrics. Old metric possible?” The very nature of the mission of tools such as vector analysis and organiza- many nonprofits makes impact measurement tional climate scales that were popular in difficult to quantify. People naturally assume the 1970s have since been discredited. The that mergers will result in efficiencies, but model most in use today is outcomes-based much of the evidence supporting this notion evaluation (OBE), which looks at the effects/ is anecdotal. Gains from merger are signifi- benefits/changes to your clients (as a result cantly based on organizations’ willingness to of a program or service) during and/or after restructure the workforce. This is unpopular they have received services. OBE can examine to do on the front end because it is so per- these changes in the short-term, intermedi- sonal and can be demoralizing; as a result, ate term and long-term. nonprofit leadership may hesitate to bring up the subject, even in times of crisis. It is also important to remember that any attempt at merger evaluation is difficult In past decades, evaluation studies asked, in the first year. While organizations that “How do you know you are successful?” and merge are understandably eager to measure the answers to that question were primar- and understand the impact the merger has ily financial reports and data on numbers

37 on programs, services, staff and overhead, in because it was not considered “a high prior- reality, the actual results of the merger may ity.” However, evaluation is critical for the not be known for several years. In addition, future health of the organization and impacts many of the costs of the merger will appear funders’ willingness to support the work of in the first 6-18 months, making an accurate the merged organization. financial picture likewise hard to determine for quite some time. Decades ago, when Evaluation should encompass both internal hospitals began merging, financial metrics and external factors, including staff reten- indicated that during the first 18-24 months tion, volunteers, geographic scope, service following merger, results were flat or down. mix, visibility in the community, funding, and However, beginning at 25 months post- other factors for which data can be measured merger, financial strength increased and and compared. In order for an evaluation to even exceeded expectations. have meaning, clear goals and objectives must be established early in the planning process, and these must be quantifiable. Evaluation of the merger is a critical step. Whatever method is used for measurement, the expectation should be around not losing A meaningful evaluation can be time-con- ground as a result of the merger. Nonprofits suming and expensive, and nonprofits may are in constant peril, given their limited feel they lack the resources to conduct an resources, staffing requirements, and con- evaluation. In a seminal 1991 study of 18 tinual need to prove credibility. If a newly- nonprofit mergers, acquisitions and con- merged nonprofit retains resources, staff solidations, (Singer & Yankey), not a single effectiveness, and credibility as a result of organization conducted a formal evaluation the merger, most organizations would call that a success.

“There are very real social beneﬁts that a merger strategy can produce for people and communities. In the right hands, mergers may produce more results than nonproﬁt leaders can achieve by simply sharpening the pencil and doing the donor calls.”

Jean Butzen, Foundation, Mission Plus Strategy

38 Vignettes of nonproﬁt mergers in Minnesota

Four recent mergers facilitated by Project ReDesign

hen people hear the word merger, they merging with a much larger one, sometimes Wusually imagine two organizations a simple asset transfer accomplishes the goal coming together to form a brand new orga- in a way that is faster and cheaper than full nization. In some cases, this is true; but more merger. In other cases, two organizations typically, one organization is absorbed into might merge, and each will keep separate the other. One organization survives (usually identities; but one of the organizations will the larger one), and one does not. legally govern the other. This is a parent/subsidiary relationship. However, these are not the only merger options from which organizations that wish Project ReDesign has helped with assess- to join may choose. The method of merger ment, planning and implementation of with the highest likelihood of success must each of these kinds of mergers. The follow- be determined on a case-by-case basis, and ing vignettes give a quick snapshot of a few Project ReDesign can assist nonprofits in iden- recent Twin Cities mergers, facilitated by tifying the best option for joining together. Project ReDesign. In the case of a very small organization

39 Two Charter Schools

With this full merger underway (approved by B educates them in 9th grade and beyond. For both school boards in December 2008) two many families, their students begin school at nonprofit charter schools are currently in the School A and complete it at School B. process of fully integrating their administration, staff, curriculum, building and services. A merger has some real advantages. It allows for closer cooperation on curriculum and The first merger between charter schools in student development, lower transporta- Minnesota will become effective at the end tion costs and a better strategic position to of the 2008-2009 school year, in July 2009. attract students in this special-needs community. Additionally, School B had been leasing These two charter schools, each of which space from a church in its community and serves students with a particular kind of phys- was interested into moving into the newer ical challenge, had something very important facility that School A enjoys. That facility in their favor when they considered merg- has space for a new gymnasium, something ing: a long history of successful collabora- School B does not have. Construction of that tion. They also had parallel missions. School gym will begin in April 2009, for completion A’s mission is to prepare their students to in time for the 2009-2010 school year. become successful and valued citizens of the world community. School B’s purpose Project ReDesign worked with both schools is to empower students to develop a sense to ensure a successful merger. The planning of identity and pride, while providing them and decision-making process took more than with the skills and knowledge to succeed as one year; and the leadership of both schools global citizens. School A serves children in are currently following a detailed Merger kindergarten through 8th grade, and School Implementation Plan.

Two Community Development Organizations

This merger illustrates a simple asset transfer, In late 2007, a large Twin Cities commu- whereby the assets of one organization are nity development organization in one geo- transferred to a “surviving” organization. graphic area merged with a very small one Usually, there are no legal or governance in a different geographic area to become a changes to the surviving organization. Asset single organization serving both locations. transfers are most appropriate for smaller These two nonprofits were each commit- organizations (generally with very few staff) ted to expanding the wealth and resources that are looking to merge into larger organi- of neighborhoods through housing and eco- zations, but that do not have any expectation nomic development initiatives. They shared of significant continuation in a governance a history of collaboration, including the capacity. Project ReDesign facilitated a provision of staff from the larger one to merger of this kind in 2007, which allowed the smaller one, which had no paid staff. In two similar organizations to position them- fact, it was this sharing of staff that eventu- selves for growth and enhanced regional ally led to discussion of a possible merger. In community development opportunities. doing so, leadership of both organizations

40 developed a merger vision to create “a Twin large organization amended its governing City-wide community development organiza- documents and the smaller one transferred tion that will better serve our members and its assets—the two organizations merged their communities.” In the course of plan- under a new name. That new entity, effec- ning the merger, the organizations identified tively merged in January 2008, is now com- expectations of positive outcomes, common prised of 43 member organizations. understandings between the two nonprofits, and a realistic timeline for the merger. The Executive director of the “new” organization had this to say about the merger Because their missions were so similar but experience: their geographic areas were different, and because one was a small organization with “Project ReDesign staff were extremely effec- no paid staff and few assets, the nonprof- tive in helping our two organizations identify its opted to merge by simply transferring both the benefits and potential obstacles of the assets of the smaller one to the larger a merger. With adept facilitating skills, they one. The smaller organization then dissolved were able to move us through a process that as a legal entity. The “new” organization insured an open and inclusive discussion that expanded its mission and membership cri- ultimately led to an agreement to merge. teria to include the both geographic areas. Left to our own devices, I doubt we could Thus, in two relatively simple steps—the have reached the same outcome.”

Two Nonproﬁts That Wished to Broaden Services

The type of merger in this example creates sufficiency. At the time of merger discussions, a parent-subsidiary relationship. It combines the organization operated 53 programs in 17 some of the merging organizations’ adminis- locations covering 13 counties. About half tration and services, with the goal of increas- of its program participants had been diag- ing administrative efficiency and program nosed with mental illness. Nonprofit B was quality. It creates a new organization, “the established in 1978 to bring coordinated and parent,” that governs and oversees all aspects responsive mental health services to persons of the other organization, “the subsidiary.” in the north metro area who dealt with the While the two organizations may still appear debilitating effects of serious mental illness. to be separate, they, in fact, function like a While significantly smaller than Nonprofit A, merged organization. it offered a variety of therapy services that included individual, group, marital and fam- A recent merger of this kind took place ily counseling. However, it lacked the criti- between two organizations with different cal size to maintain professional staff in the missions and only a partially overlapping areas of accounting, finance, human services, service area. Nonprofit A, a large organiza- development and public relations. While tion with a national reputation, was founded financially healthy, it constantly struggled in 1971 to provide services to help persons to maintain its fiscal health. The decision with barriers to employment find jobs, locate was made to explore merger, and discussions affordable housing and achieve greater self- began with Nonprofit A.

41 The organizations developed the following area, assuring that services for people with vision for their merger: mental health disabilities will be available to the community in the most efficient, least “By joining together, [Nonprofit A and B] can costly and easily accessible way.” provide vocational training and job place- ment services, along with therapy services Project ReDesign worked with these two to people with mental disabilities. This type agencies that provided different, but com- of integrated service has proven to be more plementary, services to ensure a successful effective for people with disabilities, and is a merger. In this 2008 partnering, Nonprofit A, model increasingly embraced by the State of the larger one, became the parent organiza- Minnesota. By joining, [these organizations] tion, and Nonprofit B became the subsidiary. can position themselves as leaders in this

Two Organizations Providing Mental Health Services

In July 2008, the Minneapolis St. Paul The solution was to merge with Nonprofit Business Journal published a lengthy article B, which provides help and resources to about Project ReDesign. The article used the individuals with many kinds of mental ill- example of the merger between two agen- ness. Nonprofit B is the Minnesota chapter cies that served people with daily challenges of a large, national nonprofit, whose mission relating to anxiety and mental health to illus- “recognizes that the key concepts of recov- trate Project ReDesign’s success at merger ery, resiliency and support are essential to facilitation. improving the wellness and quality of life of all persons affected by mental illness.” In 1986, a small Twin Cities nonprofit was Nonprofit B had the mission, financial stabil- founded to help people with anxiety and ity, infrastructure and compatible programs panic disorders. Individuals with these kinds and services to support the individuals that of challenges experience sudden episodes of Nonprofit A had served for over two decades, extreme fear, along with physical symptoms so a merger between the two organizations that include chest pain, heart palpitations felt like a good match. and shortness of breath. Nonprofit A offered an educational program that taught effec- In July 2008, the assets of Nonprofit A were tive strategies in anxiety management, pro- transferred to Nonprofit B, at which point moted a better understanding of anxiety and Nonprofit A dissolved and became part of panic disorders, and gave encouragement Nonprofit B. In this case, the board of direc- and support in a caring and nonjudgmen- tors of Nonprofit A remained intact and tal environment. It held bi-weekly support became an advisory committee to Nonprofit groups, organized social activities and even B; and the retiring executive director of had a lending library. Twenty years later, its Nonprofit A was elected to the board of founder/executive director was eyeing retire- directors of Nonprofit B. ment but wanted the agency to continue its mission.

42 Appendices

Appendix 1 Experts Interviewed and Interview Questions 45

Appendix 2 Literature Review 47

Books, Monographs, and Longer Documents 47

Journal Articles and Case Studies 54

MERGER BASICS 54

TWIN CITIES CONNECTIONS 60

OTHER ARTICLES AND CASE STUDIES 63

Web Surﬁng 66

Appendix 3 Full Bibliography 67

APPENDIX 1 Experts Interviewed and Interview Questions

As part of a study conducted by Project ReDesign and funded by the Greater Twin Cities United Way, 11 national nonprofit merger experts were interviewed by telephone in January and February, 2009. Most of these experts have authored books and journal articles on the subject of nonprofit mergers. Many are independent consultants currently assisting nonprofits that wish to merge.

Rather than reporting on the expert interviews in a single section of this publication, we chose to incorporate the experts’ comments throughout the entire text. In addition, quotations from these interviews may be found throughout the document.

Experts Interviewed

Emmett Carson President and CEO, Silicon Valley Community Foundation

Louise Dickmeyer CEO and Founder, Nonprofit Innovations, LLC

Peter Goldberg President and CEO, Alliance for Children and Families

William Foster Partner, The Bridgespan Group

Bob Harrington Director, Strategic Restructuring Practice Area, La Piana Consulting

Jerald Jacobs Attorney and Author, Pillsbury Law

Thomas McLaughlin Adjunct Lecturer, The Heller School for Social Policy and Management, Brandeis University

Dan McCormick CEO, The McCormick Group

David Renz Director, Midwest Center for Nonprofit Leadership

Jodi Sandfort Associate Professor, Hubert H. Humphrey Institute

John Yankey Leonard W. Mayo Professor Emeritus of Family and Child Welfare, Mandel School of Applied Social Sciences, Case Western University

45 Interview Questions

Each of the experts was asked to respond to 9. Are there incentives that should be pro- 14 interview questions: vided to assist nonprofits in pursuing mergers? 1. Do mergers improve the cost-effectiveness for funders’ investments in the 10. Should foundations consider supporting community? mergers as part of their individual priorities, or should support for mergers result 2. Following mergers, do nonprofits expe- from the intentional partnership of the rience enhanced credibility and financial foundation community? support? (Please share examples of how they do, or do not.) 11. In successful mergers, what elements are critical for the internal leadership of 3. Are there research materials or studies the merging organizations during the you would recommend to us? We are par- process: ticularly interested in those that address any evidence that nonprofit mergers a. Who should be the key leaders? bring about economies of scale. b. What role should the board members 4. From your experience, where do you see play? economies of scale realized following a merger? For example, are economies of c. What authority and expectations scale realized simply from the reduction belong to the executive director(s)? of staffing (i.e. due to the retirement of one executive director)? Are there other d. What sort of staff engagement is areas where the organizations achieve effective? improved economies of scale? e. What design or model have you seen 5. Is there a typical timeline for the merger used effectively? process? 12. What external facilitation or consulting is 6. What expenses typically surprise the necessary or is most useful? merging organizations? 13. Are there emerging national or interna- 7. What role should (or do) foundations tional trends, issues or likely challenges play? for which we should prepare?

8. What are the most effective and useful 14. Do you have any additional thoughts supportive strategies that foundations or recommendations you would like to can provide? include?

46 APPENDIX 2 Literature Review

In order to better understand current nonprofit merger trends and to help nonprofit organizations and foundations view merger as a positive strategic alternative, Project ReDesign undertook a comprehensive literature review. With support from The Greater Twin Cities United Way and with research help from Library Strategies Consulting Group, the Literature Review was completed in January 2009. Many of the resources listed in the Full Bibliography are reviewed below.

Books, Monographs, and Longer Documents

Davis, John Emmeus. Bridging the Organi- Dickmeyer, Louise C. No Risk—No Reward: zational Divide: The Making of a Nonprofit Mergers of Membership Associations and Non- Merger, Burlington, VT: Burlington Associates in profits (A Handbook to Help You Prepare for Community Development, LLP, 2002, 39 pp. the Complexity of the Process and Avoid the Inherent Pitfalls), Andover, MN: Expert Publish- Download this free monograph at ing, Inc., 2009. d www.nw.org/network/pubs/studies/ documents/makingOfNonproﬁtMerger.pdf Despite a strong interest in mergers among nonprofits today, it has been quite a few years since a This detailed monograph relates the merger new book on the subject has been published. This between two nonprofit housing development cor- soon-to-be-published handbook addresses the porations in Nashua, New Hampshire. French Hill need for mergers among nonprofits and why they Neighborhood Housing Services and the Greater should be considered as an option to strengthen Nashua Housing and Development Foundation an organization. Ms. Dickmeyer looks at market combined in 2000 to form Neighborhood factors and agrees with nationally-known merger Housing Services of Greater Nashua. It describes consultant Thomas McLaughlin that mergers the community of Nashua and outlines the hous- “should be mission and service driven…and not ing situation that led to the development of these about the agency itself surviving, but about the nonprofit agencies and to the eventual decision survival of services to clients.” to merge them. The section titled, “Assessing the Potential for Collaboration,” examines pros, The author was president & CEO of the cons, concerns, hopeful signs and “things we Minneapolis Regional Chamber of Commerce must work on.” Davis walks the reader through when it merged with the Bloomington (MN) the entire merger process, from developing time- Chamber of Commerce in late 2001. She uses lines through merging missions, services and pro- this merger as a case study throughout the book, grams, to forming a new board and working out which provides the reader with a side-by-side staffing details. Budgets and legal considerations comparison of the two organizations before the are also discussed. There were thorny legal ques- merger began, and tracks the progress of the tions, issues about staffing, and concerns about merger over a period of about 15-18 months. The the location of the new organization’s offices that book never glosses over the difficulties and com- delayed the merger process, and Davis spends plexities of the process, but Dickmeyer describes a number of pages explaining how these were it as “an effort worth undertaking.” She coun- handled. Perhaps the most valuable section is sels nonprofits considering merger to seek out a reflective one, “Learning from the Merger resources (people, experts, publications, websites, Process,” that any agency considering merger and others) that can assist with this sometimes- will find of interest. overwhelming task.

47 Dickmeyer closely examines organizational cultures organization completed five more mergers that in several parts of the book, which she cautions brought about profound changes in the nonprofit. organizations considering merger not to underesti- Each of the merged agencies approached Family mate, calling culture a “deal breaker.” While prep- Service to discuss merging, and each merger was aration is essential to a successful merger, cultural carefully planned and executed. The process that differences may be the most difficult to read and Family Service followed in its mergers has now anticipate. It is the job of the paid executive, she become a nationally recognized model. says, with the help of volunteer leaders, to make the cultures mesh, and she has practical sugges- In this agency history, Ron Reed, Family Service’s tions for how that can be accomplished. executive director during the recent merger period, outlines six key points he learned from An entire chapter is devoted to the critical nature participating in the merger process: of communication throughout the merger process. “An ineffective communications strategy, or one s Focus on Mission—Similarity of agency that is not comprehensive,” says Dickmeyer, “may missions was an important factor in the do more to destruct the process rather than propel merger process. it toward the ultimate goal.” Rather than simply s Lead with Vision—Developing a shared discussing the topic of communication, the author uses the case study of the merging Chambers of vision of what the combined agency would Commerce to illustrate all aspects of an effective look like was critical. communication plan: marketing, public relations, s Involve People/Human Dynamics—The member communication, and internal commu- most important element in a merger is nication. Importantly, she is also frank about the people. problem areas, such as a too-short time frame in which to communicate and staff confusion over s Develop a Win-Win Situation—It is impor- the speed and intent of the merger. tant to develop an atmosphere of mutual respect, trust and openness when deal- Subsequent chapters take up the topics of ing with differences and to communicate finances, structure, governance, legal consider- openly and directly. ations, and post-merger integration. While not a “workbook,” this book includes helpful appen- s Deal with Difficult Issues Early—Develop dices such as a recommended Transition Team common understandings and a clear plan. structure, a breakdown of duties of the Transition Team, a merger timeline, and a sample Transition s Take Time To Do It Well—Recognize Team meeting agenda. There are also sample legal merger phases: pre-merger phase, plan- documents, merger ballots, meeting notices, and ning phase, implementation phase, stabili- a sample letter notifying constituents of the com- zation phase. pleted merger. The author summarizes the agency’s 1990s active merger time in these words: Haidet, Mark E., Thomas J. Kelley and Paul D. Nelson. A Legacy of Leadership and Service: A “In the 1990s, Family Service honored its tradi- History of Family Service, Inc. (Rev. ed.), St. Paul, tions and stayed true to its identity. Its mission, ‘to help improve the quality of individual, family, and MN: Ramsey County Historical Society, 2004, 213 community life,’ remained central. Hence, there pp. (This review covers just the portion of the were few changes in its programs, only additions, book that deals with Family Service’s mergers of enhancements, and experiments...Two forces the 1990s, pp. 103-123.) have carried Family Service from the 19th century st In its first 97 years (1892-1989), Family Service to the 21 : leadership and mission.” (St. Paul, MN) had been involved in four mergers. During the brief period of 1989-1991, the

48 La Piana, David. Beyond Collaboration: Strate- s Nonprofits attempting to restructure must gic Restructuring of Nonprofit Organizations, overcome perceived threats to autonomy and San Francisco, CA: The James Irvine Foundation, board and staff members self-interests, as well 1997, 22 pp. as culture clashes.

Download this free monograph at s Because the concept of restructuring is still d www.lapiana.org evolving, additional research is needed to ana- lyze the factors that determine success/failure, In 1996, the James Irvine Foundation com- establish best practice guidelines, and provide missioned a study to help nonprofits integrate information for leadership. their organizations for greater efficiency and an s By sponsoring educational activities that raise increased chance of survival. Nonprofit collabora- overall awareness in the sector, funders can tion expert David La Piana was hired to conduct introduce nonprofits to strategic restructuring the study, which investigated attitudes of non- options without requiring them as part of a profit leaders, and developed and tested ideas for “strategic restructuring.” This term extends grant agreement. beyond mergers and actually refers to a contin- s Funders can provide direct assistance to orga- uum of partnerships that also include consolida- nizations engaged in restructuring by offering tions and joint ventures. workshops, training consultants, or providing direct financial support. The James Irvine Foundation study addressed five basic questions: While this monograph is now 10 years old, the ques- 1. How can we best define and describe tions asked are still the ones facing nonprofits today, the options for nonprofit strategic and the findings of the study are still very relevant. restructuring? It provides an excellent overview of the motivations and challenges that drive the move toward nonprofit 2. Is the climate right for strategic restructuring and the role that funders can play in restructuring? focusing attention on collaborative options. 3. What pressures lead nonprofits to consider mergers, consolidations and joint ventures, La Piana, David. The Nonprofit Mergers Workbook and what difficulties prevent them from Part I: The Leader’s Guide to Considering, Negoti- bringing these efforts to fruition? ating, and Executing a Merger (Updated Edition), St. Paul: Fieldstone Alliance, 2000, 240 pp. $34.95 4. How can funders encourage nonprofits to undertake strategic restructuring without This book is available for purchase at being perceived as applying pressureF to doF Amazon.com and from Fieldstone Alliance so? at www.ﬁeldstonealliance.org 5. What educational activities can funders promote to encourage strategic restructur- This is a very user-friendly and graphically-rich book ing activities, such as mergers, consolida- that starts at Square One: explaining the pros and tions and joint ventures? cons of mergers and outlining the varied forms that mergers may take. In addition to an abundance of Some of the findings include: illustrations, tables and graphs, each chapter of the book contains case studies that illustrate examples of s While many nonprofits consider changing how the section topic was handled by “fictional com- their organizational structure due to eco- posite” organizations in real situations. Each chapter nomic pressures, some strategic restruc- concludes with a short summary of the information turing is natural as the nonprofit sector the chapter provided. matures.

49 The author walks the reader through the process La Piana Associates. The Nonprofit Mergers of organizational assessment: understanding the Workbook Part II: Unifying the Organization organization’s motives for and expectations of the After a Merger, St. Paul: Fieldstone Alliance, merger process, assessing board and management 2004, 230 pp. plus CD-ROM. $44.95 leadership, and looking at risk-taking and growth. He provides a helpful guide for organizations who This book is available for purchase at are in “crisis” situations and assists the readerF inF Amazon.com and from Fieldstone Alliance identifying appropriate partner organizations and at www.ﬁeldstonealliance.org conducting assessments to find the best match. He also provides guidance on identifying the costs of This book is the sequel to La Piana’s first Nonprofit merging and on exploring funding sources. Mergers Workbook. Like that text, it is very practical and hands-on. While Part I addresses the moti- La Piana frankly addresses common problems such vations, negotiations and processes of a merger, as autonomy, self-interest, and culture clashes, and it does not delve deeply into the complex imple- he provides case studies that illustrate how they mentation issues that follow merger approval. can be handled. There is a lengthy chapter on This phase is his focus in Part II. Like the prede- negotiating a merger, which breaks the complex cessor to this text (Part I), this book is filled with process into four well-defined steps. The author graphics, boxes and sidebars that make the book provides details right down to minute-taking and visually appealing and easy to use. It also contains rumor control, and he even includes a table list- chapter summaries. ing “typical issues” in merger negotiations (governance issues, financial issues, human resource La Piana says the challenging Implementation issues, etc.). Phase requires a great deal of time and energy and directly or indirectly involves everyone in the Once a merger is approved, implementation can merged organization. It has two components: be a huge challenge. La Piana addresses the basics legal execution of the merger, and integration. and explains the relationship between implemen- The first component creates a single organization tation and “integration.” This includes integrating on paper, but that organization isn’t a reality until boards, systems, management and staff, and han- the second component, integration, has taken dling culture conflicts that might arise. As in every place. Key integration questions may be ignored F section, helpful case studies are provided. or delayed in the busy-ness of the negotiation process, and once the “deal” is struck, organiza- Appendices include: tion leaders may return to catching up on daily s Sample final minutes from a completed matters. Consultants’ contracts may end. The negotiation result is that implementing a merger often begins with only a vague idea of what lies ahead. s A pre- and post- merger organizational profile to help illuminate outcomes This book is divided into two main sections. The first, “Going the Distance,” addresses effective s A sample ad for a nonprofit seeking a change leadership, managing the integration partner process, helping people cope with change, and effective communication. Section two, “Creating s A sample confidentiality agreement an Integration Plan,” helps users develop the s A sample implementation/integration plan content of a plan and integrate Boards, culture, management, staff and volunteers. The author There is also a list of resources and helpful (repro- tackles the complex subjects of integrating sys- ducible) worksheets. tems, programs, and communication/marketing. Each chapter in the section contains both summaries of the information and “Challenges and

50 Roadblocks” that might arise. For example, in a mission. Instead, mergers, he says, are about the section on integrating staff and volunteers, “melding” missions of nonprofits, thereby allow- possible challenges include resistance to change, ing the combined entity to pursue a common pur- rumors, and low morale. If people are laid off, pose with greater stability. Mergers become “the they must be treated well, but a focus on indi- rebirth of an organization rather than the death vidual concerns must be balanced with a focus on of a mission.” the organization’s overall well-being. His chapters walk the reader through the merger Appendices (these are in both the book and on process: accompanying CD-ROM) include: 1. Deciding to merge—reasons, emotions, s A sample integration plan organized by driving forces, strategic objectives, cost activity area and target date 2. Selecting a merging partner—connections, s A pre- and post- merger organizational similarities/differences profile (also in Part I) 3. Laying the groundwork with staff and s A sample human resources audit to reveal volunteers—considering human ele- strengths/weaknesses in each nonprofit’s ments, choosing a leader, building support, HR system and identify issues needing spreading the word resolution 4. Negotiating and determining structure— s A sample technology audit that looks at governance, by laws, making the structure hardware, software, training and support work 5. Dissolution vs. merger—control of assets, McCormick, Dan H. Nonprofit Mergers: The determining the surviving organization, Power of Successful Partnerships, Gaithersburg, fundraising MD: Aspen Publishers, 2001, 170 pp. $71.95 6. Technical and legal aspects—voting, elect- This book is available for purchase at ing a new Board, legal issues such as FF Amazon.com and is also at the Minneapolis employee benefits Public Library’s Foundation Center, call #REF 7. Working with consultants and attorneys— HD2769.M334.15 2002 SOC hiring a consultant, finding appropriate legal counsel, working with CPAs and McCormick is CEO of the McCormick Group, other professionals which facilitates organizational structure and provides services in foundation development, and he 8. Transitioning to merge—employee unrest, is also a leading consultant in nonprofit mergers volunteer relations in the U.S. 9. Evaluation and stewardship—looking at In this book, he rebuffs the notion that “merger” overall financial capacity, volunteers and equals one company consuming another (that’s members, increased efficiencies, redeploy- a “takeover” or “acquisition”). Rather, mergers ment of critical staff, financial/mission among nonprofits are opportunities for growth, integrity better alignment of resources, and a demonstra- tion of stewardship. He advises the reader to Appendices include case histories of the Windstar throw away the old notion that a merger means Foundation and the American Cancer Society, the death of an organization or the failure of along with sample documents that can be adapted to individual merger situations.

51 McLaughlin, Thomas A. Nonprofit Mergers and 1. A penetrating discussion of the reasons to Alliances: A Strategic Planning Guide, New York, collaborate NY: John Wiley & Sons, 1998, 256 pages. Price 2. The C.O.R.E. Model, a merger/alliance anal- starts at $92.97 at amazon.com. ysis framework

This book is available at the library at 3. Advice on partner selection FF MSU Moorhead (call # HD2769.15. 4. Structure choice analyses M34 1998), and is available for purchase 5. Step-by-step guidance through merger and at Amazon.com. The review below is alliance processes excerpted from the book’s cover ﬂaps and 6. A disk with forms and worksheets that any table of contents. nonprofit can customize for its own needs

After more than a century of proliferation and Supplemented with easy-to-use checklists and ana- growth, the nonprofit sector has reached a cross- lytical tables, Nonprofit Mergers and Alliances helps roads. The continued success of an organiza- nonprofit board members and managers make the tion’s mission no longer depends on fresh, new right decisions, monitor the entire process, antici- programs and the extension of services, but on pate problems and find solutions quickly. The innovative management and a revitalized organi- information contained in this book will help any zational structure. The time has come for all non- nonprofit organization ensure the successful con- profits to consider mergers and alliances in their tinuation of its mission in the immediate future as strategic plans. For many, this may seem a dis- well as for years to come. tasteful alternative after decades of Wall Street mergers made at the expense of workers, com- Table of Contents: munities and consumers—but it doesn’t have to Part I—Deciding to Merge be that way. Part II—The C.O.R.E. of Nonprofit Collaboration In Nonprofit Mergers and Alliances, Thomas Part III—Structuring the Collaboration McLaughlin describes a context for nonprofit Part IV—Seven Steps to a Successful Nonprofit mergers and discusses the forces that shape their Merger use. He demonstrates that nonprofit mergers are fundamentally different from corporate mergers, Part V—Strategies for Developing Alliances that they can be of immense benefit to the community as well as to the merging organizations, McLaughlin, Thomas A. Seven Steps to a Success- and that failure to merge can be disastrous for ful Nonprofit Merger, Washington, DC: National everyone. McLaughlin focuses on the concerns of Center for Nonprofit Boards, 1996, 28 pp. the nonprofit sector: achieving the mission, retaining tax-exempt status, behaving responsibly in the This monograph is out of print but is avail- community. He shows nonprofit managersF andF able at the Minneapolis Public Library’s Foun- board members how to make their way through dation Center, call #REF HD62.6.M35 1996 the merger process without repeating Wall Street misbehavior. McLaughlin begins this small but very practical Using real world examples and case studies, monograph with a statement that mergers are not Nonprofit Mergers and Alliances offers clear, prac- a sign that a nonprofit has failed, but rather they tical step-by-step guidance through the merger are becoming “a strategic option for dealing with st process from preliminary considerations to actual the nonprofit management challenges of the 21 implementation—pointing out pitfalls and offer- century.” Today, tightening government funding ing insightful commentary along the way. This and an increased need for effective service delivery helpful volume provides: are heightening the need for consolidation, integration and efficiency. The goal of mergers is not

52 always cost savings. Other important outcomes restructure as needed. Look at the inter- are “achieving economic size” (the minimum pos- nal and external results of the merger. sible size for a nonprofit to be able to provide ser- Determine whether merger accomplished vices in its field without long-term damage to its what was hoped for. financial base) and integrating services. Through mergers, nonprofits are putting an end to frag- Wenger, Hilda Shirk. Motives for Mergers mented service delivery and inefficient use of eco- Among Family and Child-Serving Agencies, dis- nomic resources. sertation.com, 2000, 97 pp. $19.95 The author’s seven steps are: Available for purchase at Amazon.com and 1. Get to know your partner FF www.dissertation .com What are the motivations for merging? What are the organizations’ cultures? How Ms. Wenger’s PhD Business dissertation for North can trust be built? Central University in Arizona looks at what moti- vates nonprofit social service agencies to merge, 2. Form a merger committee and whether the merger achieves what was Be strategic. Solicit the help of a consultant intended. It also looks at unanticipated problems or facilitator. Form necessary subcommit- and changes to mission statements as a result of tees. Establish basic ground rules. the merger. The study focuses on family and child- serving organizations that have merged with sim- 3. Choose the chief executive and the organi- ilar organizations between 1988-1999 through zation’s name a mutually agreed-upon process. Ms. Wenger Will the leader come from within the ranks explains, “As traditional social service agencies or from an external search? Naming can look for ways to improve the quality of their ser- be a contentious issue and one with legal vice provision in light of increasing environmental ramifications. and internal pressures, they need to know what 4. Structure the new entity mergers can and cannot do for them. There is Design the board and governance struc- much that can be learned from the experiences of those that have already responded to those ture. Balance interests. Expect a 6-9 month pressures and restructured their organizations.” period leading up to formal merger. The Alliance for Children and Families, a national 5. Encourage acceptance through effective membership organization servicing more than communications 365 nonprofit agencies that provide a wide range Most resistance will come from “Big Es”— of services for children, families and communities, ego and economics. An effective, strate- provides the context of this study. gic communications plan can help reduce Among the author’s findings: There is a pro- internal and external resistance. active reason for many mergers (e.g. agencies 6. Write a merger agreement are merging to share resources and improve cli- Check with your state oversight office to ent services) in contrast to literature that suggests see if there are documentation require- such mergers are largely a response to factors ments. Find an attorney knowledgeable that threaten survival. Greatest gains from merg- about the corporate structures of nonprofit ers were reported in improved client services, organizations. with lesser gains in administrative cost savings and organizational stability. This view of merger Don’t forget the champagne! as an opportunity for growth—not a reaction to threat—gives an important perspective for agen- 7. Implement and evaluate the merger cies making decisions about the feasibility of stra- Evaluate all organizational functions and tegic restructuring.

53 Yankey, John A. Barbara Wester Jacobus, and Journal Articles and Case Studies Kelly McNally Koney. Merging Nonprofit Orga- nizations: The Art and Science of the Deal. MERGER BASICS Cleveland, OH: Mandel Center for Nonprofit Organizations, 2001, 69 pp. Bradley, Bill, Paul Jansen, and Les Silverman. “The Nonprofit Sector’s $100 Billion Opportunity.” Download this free document at Harvard Business Review, May 2003, Vol. 81, No. d http://case.edu/mandelcenter/publications/ 5, pp. 94-103. (Electronic copy. Excerpted from an casestudies/MergingNonproﬁtOrgs.pdf author’s abstract.)

This publication is a product of the Strategic Alliance Imagine what $100 billion a year could do for Project, an initiative of the Mandel Center for philanthropic and other nonprofit institutions. Nonprofit Organizations at Case Western University. According to a new study, the nonprofit sector The Center’s mission is to enhance the effectiveness could free that amount—maybe even more—by of nonprofit leaders and managers and the organi- making five changes in the way it operates. The zations they serve through education, research and study asked two central questions: Does the sec- community service. tor’s money flow from its source to its ultimate use as efficiently and effectively as possible? If not, Mergers, say the authors, are both science and where are the big opportunities to increase social art. They are somewhat systematic and predictable benefit? (science); but they are also often highly unpredict- able—involving individuals and organizations with While this article does not directly address merg- histories, personalities and cultures. The authors ers, it examines the big picture of which merg- liken mergers to “artful dances” and this book ers and other kinds of collaborations are a part. is intended to guide nonprofit leaders through The authors believe that nonprofits could save that dance. It is an engaging workbook struc- $25 billion a year by changing the way they raise tured around two nonprofits that are composites funds; and by distributing funds more quickly, of several different organizations with which the they could put an additional $30 billion to work. authors are familiar. The organizations’ experiences Organizations could generate more than $60 bil- are presented through the eyes and perspectives lion a year by streamlining and restructuring the of several individuals involved in the complex pro- way they provide services. Part of streamlining cess. The individuals’ “Lessons Learned” one year and restructuring includes trimming administrative later are presented at the end of the study. Lessons costs (which added up to $80 billion among non- included: profits in 1999). The authors note that scale economies work against small nonprofits, which have s An appreciation of establishing a shared higher administrative cost ratios than their larger vision peers. Sharing service arrangements and consoli- s The realization that it takes a great deal of time, dating office functions can improve the bottom energy and money to complete a merger line. In the cases of the Alzheimer’s Association, Girl Scouts and Planned Parenthood, consolidat- s The importance of involving an appropriate ing under-performing chapters provided a partial cross-section of stakeholders solution. s The necessity of building trust s The importance of communication s The value of merger in preserving the strength of an organization s The value of a well-chosen “neutral” consultant in guiding the process

54 Butzen, Jean. “Are Nonprofit Mergers an Ethical Dewey and Kaye. “Nonprofit Mergers: An Way to Grow?” (Blog, November 26, 2007). Assessment of Nonprofits’ Experiences with the Merger Process,” Tropman Reports, The Forbes Read the blog at Funds (Tropman Fund for Nonprofit Research), d www.missionplusstrategy.com/ November 2007. 2007/11/are-nonproﬁt-m.html www.forbesfunds.org/docs/Tropman2007/ Jean Butzen is a former nonprofit CEO who now d Report2-DeweyKaye.pdf does consulting work on values-driven mergers, partnerships and management for nonprofits. The Why do nonprofits explore merger? What do subject of her Nov. 26, 2007 blog is the October they expect to achieve? How long do they take? 2007 merger of The Points of Light Foundation How much do they cost? What are the results? and the Hands On Network. Both of these orga- This report looks at 22 nonprofit organizations in nizations were successful stand-alone nonprof- Allegheny County, Pennsylvania, that explored, its. Why merge? One reason is to “get to scale” attempted or completed a merger. It seeks to to tackle large problems. How, she asks, does a answer the questions above and provide recom- nonprofit get to scale in this capital-starved envi- mendations that nonprofits and funders can use ronment? Good business practices and close to inform their conversations about the merger attention to marketing and fundraising are essen- process. tial; but a quicker and perhaps more efficient way is through mergers, consolidations and alliances. This Tropman Report, one of a number of non- The author invites readers to share their thoughts profit studies that the Forbes Funds has sup- and comments on the subject. ported, asks five questions: 1. How do merger opportunities typically Chronicle of Philanthropy, Live Discussion, emerge? December 2, 2008. http://philanthropy.com/ 2. Why were merger explorations live/2008/12/mergers_and_alliances/ undertaken? This resource is the transcript of a live (and 3. What were the roles of staff, board and lively) online discussion that took place in early outside assistance in the merger process? December 2008. Guests were William Foster, a 4. How long did the merger process last? partner at the Bridgespan Group, his Bridgestone colleague Alex Cortez, and Lois Savage, presi- 5. What were the results of the process? dent of the Lodestar Foundation. The panelists took questions from people from a wide range The tables of theme-based recommendations of nonprofits and from some consultants as well. for nonprofits, such as a recommendation under While some participants’ questions were directed “Culture” that “Experienced consultants can to their own specific circumstances, others were help a merged organization address cultural dif- more general, such as how to begin discussions ferences and reduce the time required for post- about mergers and collaborations, what the major merger integration” and recommendations for differences are between nonprofit and for-profit funders such as “Mergers are driven by emo- mergers, and how foundations can encourage tion. Focusing on mission instead of cost savings collaborations among their grantees. The ques- will bring more nonprofits to the table” are well tions are ones that many nonprofits ask and the worth exploring. answers are direct. In the course of the discussion, Savage explains her firm’s Collaboration Prize, a $250,000 award to “the best collaboration between otherwise competitor nonprofit organizations.” That prize was announced in spring 2008 and awarded in March 2009.

55 Dickey, Marilyn. “Making a Merger Go Smoothly Many of the published resources about merger for Nonprofit Workers.” Chronicle of Philan- stress the importance of merging organizations’ thropy, June 10, 2002, p. 37. “cultures.” But what does this mean? Culture is something that cannot be seen, but it surrounds Author Dickey focuses on a critical part of the everyone in the workplace. It is comprised of the implementation phase of any merger: people values, beliefs, underlying assumptions, attitudes, issues. People fear lay offs, salary/benefit reduc- and behaviors shared by a group of people. It is, in tions, changes in supervision, and restructured short, the (generally unspoken) rules for working jobs. Constant communication and “rumor- together. The author offers seven characteristics of control are essential. She cites the example of culture: two Columbus, Ohio AIDS organizations that planned to merge. They moved into the same s Culture = Behavior building together more than a year before their s Culture is learned merger was finalized. Doing so gave employees s Culture is learned through interaction time to become acquainted with their new col- leagues and removed much of the “fear factor.” s Sub-cultures form through rewards Leaders of two merging organizations in San s People shape the culture Jose, California, organized programs to help the staffs of the two groups become acquainted in s Culture is negotiated informal settings and put changes into place that s Culture is difficult to change employees requested (like reduced paperwork). It reduced people’s tendencies to become “territo- Hodgkin, Christopher. “What You Should Know rial” and made them more willing to view change About Nonprofit Mergers.” Nonprofit World, in a positive light. July/August 1994, Vol. 12, No. 4 (Electronic copy)

This article looks at merger from a legal point of Hackett, Kelly. “Essential Pre-Merger Reviews.” view. The author defines a “true merger” as one Association Management, July 1997, vol. 49, where “one organization survives and the other No. 7 (Electronic copy) is legally dissolved, transferring its assets and pro- With more associations looking for ways to grams to the surviving organization.” He takes the streamline costs and increase efficiency while reader through the complexities of the process— continuing to serve their members’ needs, inter- structural issues, legal issues, process issues, and est in mergers is increasing. When that happens, cultural issues – and offers alternative suggestions the board must perform a due diligence review to merger. One is a joint operating agreement of the other parties to the merger to determine (sharing administrative staff and offices but main- whether this action would further the interests of taining separate programs). Another is to establish the organization. The due diligence process helps a parent-subsidiary relationship. These alternatives ensure that the members of the board satisfy their allow organizations to work together for a period fiduciary duties of care, loyalty and obedience. of time to see whether they are compatible merger partners. Hodgkin notes that a merger is “basically irreversible” and should not be entered into with- Heathfield, Susan M. “Culture: Your Environ- out comprehensive planning and thinking about ment for People at Work.” About.com. Human many complex issues. He advises that “a merger Resources. will always take longer and cost more than you think it will.” While some savings will occur as a http://humanresources.about.com/od/ result of the union, most savings will not show d organizationalculture/a/culture.htm up for a year or two, and the merged organization must have a financial cushion to survive the process.

56 Jacobs, Jerald A. “Association Mergers and Con- in the nonprofit world. Also, “mergers beget solidations: Strategic Considerations.” Associa- mergers.” That is, nonprofits become inspired by tion Management, August 2004. Vol. 56, No. 8, mergers that they observe, and board members, pp. 17-18 (Electronic copy). usually talented business people, proselytize for the benefits of combining. The author goes on While, from a legal standpoint, mergers and con- to discuss the “mechanics” of merging: inquiry solidations are among the most complex legal and consideration, planning, approvals, and clos- endeavors that associations can undertake, asso- ing the deal. ciations with overlapping or complementary purposes, memberships, activities, or long-range plans may be able to serve their constituen- Kohm, Amelia. “What Happens When Nonprof- cies best by joining together to form one larger its Consolidate (Either Partially or All the Way)? association. Nonprofit World, May/June 2002, Vol. 20, No. 3, pp. 24-29 (Electronic copy). Jacobs, an attorney, explains the differences between three options: consolidations, mergers This article reports the results of a survey con- and the less-common “dissolution and transfer of ducted by the Chapin Hall Center for Children, a assets.” He stresses the importance of due dili- policy research center at the University of Chicago, gence reviews to protect the liability of individual and Strategic Solutions, a California-based project board members in mergers and consolidations. of La Piana Consulting, asking 192 U.S. nonprofits These reviews affect full disclosure and objec- to share their strategic restructuring experiences. tive evaluation of financial and legal risks of each Researchers divided partnerships into two cate- combining association. The presence of adverse gories – Alliances (administrative consolidations, findings in such reviews is not necessarily cause joint programs) and Integrations (mergers, joint for a board to reject the planned combination; ventures, management service organizations). however, it requires board members to create Among the findings: strategies for dealing with these realities. s Very young and very old organizations were less likely to be involved in strategic Jacobs, Jerald A. “Mergers: Easier (and Harder) restructuring Than You Think.” Associations Now, July 2008. s Integrations usually involved fewer organi- www.asaecenter.org/PublicationsResources/ zations than alliances did d ANowDetail.cfm?ItemNumber=35070 s Competition is a key factor in the decision to restructure Jacobs notes that nonprofit mergers are actually more difficult than business mergers. When s Most respondents entered into restructur- business leaders consider merging, they look at ing to improve the quality of what they do revenue, profits, capitalization, cost cutting, and rather than because of threats of closure or other economic factors. But nonprofit mergers, pressure from funders contrary to popular belief, are rarely driven purely by economic factors. They focus on the survival s The most common benefits of restruc- of programs, identification of leadership, and the turing were increased services, increased “cultures” of the groups. The benefits of nonprofit administrative capacity and quality, and mergers are often difficult to quantify because increased market share they may seem “personal” to those affiliated with s Most common problems were conflicting the organizations and services. Jacobs explains the growing number of nonprofit mergers as a organizational cultures, adjustment of staff result of an increase in leadership professionalism to new roles, difficulty in building trust

57 s Factors most strongly contributing to suc- opportunities presented by potential merger can cess were a staff/board member who move those organizations away from acceptance championed partnership, positive past expe- of the problems and toward actions to resolve riences with partnering with others, board them. He urges leaders to consider the organiza- encouragement, organizational orientation tion’s history of risk-taking and growth. Finally, he toward risk-taking and growth advises anyone considering merger to look around their own nonprofit community for examples of Kohm goes on to relate two case studies, the first success and share them with others in your orga- a consolidation between Stage One, a children’s nization. Pay attention to what the reactions to theatre in Louisville, KY and the Kentucky Center those stories tell you. for the Arts (KCA), a larger organization that could provide Stage One with office space, maintenance Light, Paul C. “The Risk of Too Much Charity and security, accounting and phone systems, and Reform.” Brookings, April 20, 2000. technical support. In return, KCA deepened its mission of serving all Kentuckians because it now www.brookings.edu/opinions/ had a vehicle with which to reach children. A sec- d 2000/0420governance_light.aspx?p=1 ond describes a union between Talbert House and Core Behavioral Health Centers of Cincinnati, OH. Paul Light, Vice President and Director of Both had similar missions (offering services in men- Governmental Studies at the Brookings Institution, tal health, community corrections, and substance takes a wide angle look at the charities reform abuse), but one (Talbert House) was much larger movement in this short opinion piece. How chari- than the other. After rejecting a full merger because ties do their work is becoming almost as important of the smaller organization’s concerns about losing to grant makers and charity clients as the goods its community orientation and relationships with and services the charitable organizations deliver. funders, the two groups settled on a parent-sub- He argues that charities feel more pressure than sidiary relationship that established Core as a mem- ever before to improve their internal management, bership organization with Talbert House as its only and they generally follow one of four philoso- member. The author concludes the article with a phies: 1) Adopt a common set of best practices, 2) reflection on how the language of courtship and Measure results, 3) Merge, re-engineer and down- marriage can be appropriate in the world of stra- size, 4) Make more information available to the tegic restructuring. “As the saying goes, ‘Marriage public. Light feels there is no one way to improve is when two people become as one; the trouble performance, and that nonprofits can learn from starts when they try to decide which one.’” federal reform efforts, which have often “done more harm than good.” In the case of alliances, La Piana, David. “Nonprofit Mergers: Is Your nonprofits must think seriously about how much Organization Ready for the Road?” The Grants- time and energy a successful alliance demands. manship Center Magazine, Spring 2001. MacDonald, Jeffrey. “Nonprofit Organizations www.tgci.com/magazine/01spring/road1.asp d Seek Strength in Mergers.” Christian Science Monitor, June 5, 2006 Nationally-known merger expert David La Piana provides self-assessment questions for organiza- www.csmonitor.com/2006/0605/ tions wondering if merger is the right move for d p13s01-wmgn.html them. He probes motivations and expectations for merging (Is it because of finance, skill set or mis- This article quotes nonprofit merger expert Thomas sion? Are there specific, measurable outcomes?). McLaughlin extensively. Nonprofit mergers, once He addresses the issue of unification—of missions, thought of as the ‘m-word’ are shedding their strategic purposes, and leadership. In the case of stigma to the point of becoming alluring. After suc- organizations with chronic problems, he notes that cessful consolidations for such well-known groups

58 as the Girl Scouts of America and the American s The time between the deal’s announcement Lung Association, nonprofits of all sizes are testing and its close, and the waters. Funders play a key role in the “merger mania.” Because federal dollars are shrinking s The first 100 days after the close and competition for grants is becoming increas- The longer the soon-to-be-merged organizations ingly intense, private and public benefactors are are in the period between the announcement and encouraging efficiencies and economies of scale. the close, the more consuming and the more com- Observers of the nonprofit sector expect mergers plicated the communication becomes. Speeding to continue. things along, bringing closure with appropriate involvement from all who must sign off or buy-in, McCormick, Dan H. “Nonprofit Mergers: Laying and forging social connections are critical require- the Groundwork with Volunteers and Staff.” The ments for the spokespeople. Several case studies of Grantsmanship Center Magazine, Spring 2001. merging associations illustrate the authors’ points.

http://tgci.com/magazine/01spring/ Prokuski, Bronislaw. “Anatomy of a Merger.” d ground1.asp Association Management, February 2002, Vol. 54, No. 2. (Electronic copy) When a merger takes place, some staff and volunteers who are emotionally connected to the “old” A merger, says Prokuski, is like a marriage: organization’s mission may have difficulty accept- “On the surface, it may make sense to a lot ing the new one. This article by a national merger of people, but one needs to question whether consultant addresses the topic of managing such the underlying conditions are right.” This arti- discontent. Identifying new leadership early in the cle provides an excellent walk-through of the merger process is critical, says McCormick. Getting merger process. While the author’s experience “volunteer leaders” to positively influence other comes largely from the merger of associations, not volunteers or board members is also a good strat- charities, the parallels are obvious. A merger offers egy. Taking time, involving staff and middle man- the opportunity to think out of the box and has agement in the merger process, and maintaining the greatest chance of success when both parties clear communications are also necessary. The approach it from a mission and business opportu- author points out that “While mergers may start nity point of view, rather than from crisis. from the top and work down, they are only successful from the ground up.” He concludes with He offers advice to test your organization’s com- a reminder that mergers can be opportunities to patibility with a possible merger candidate and effect sweeping organizational change, providing discusses challenges presented when the merging fertile ground for initiatives such as zero-based organizations are not equals. Like other consultants budgeting, decommissioning programs of ques- cited in this Literature Review, Prokuski advises tionable value, opening/closing facilities, etc. with selecting a new leader very early on in the process. the final goal of unification of people, programs Pay attention to staff morale, he says, and commu- and priorities. nicate “up, down, and sideways.” There are practical suggestions such as developing a basic fact sheet covering the reasons for merger, who made Patrick, Georgia and Gary McCoy. “Mind Your the decision, and expected benefits, and following Merger.” Association Management, June 2003, this fact sheet with question-and-answer sessions Vol. 55, No. 6. (Electronic copy) with staff. Mergers can take years to complete and are rarely easy; merging associations (like merging The emphasis of this article is the vital role that charities) is often more difficult than merging for- communication plays in the merger process. One profit corporations. of leadership’s most important roles is to champion the communication process, moving people as quickly as possible between two critical deadlines:

59 Singer, Mark I. and John A. Yankey. “Organi- Mergers are “a trend that is going to acceler- zational Metamorphosis: A Study of Eighteen ate,” said Walt Shill of Accenture, which recently Nonprofit Mergers, Acquisitions, and Consolida- took on its first nonprofit merger, helping to join tions.” Nonprofit Leadership & Management, the Hands On Network and the Points of Light Summer 1991, Vol. 1, No. 4, pp. 357-369. Foundation. “Donors are becoming more like investors: they expect a greater return on their This scholarly article stands out because it reflects nonprofit investments.” Another kind of merger a time (1980s) when mergers were frequently is becoming more common: “partial mergers,” “last resort efforts to survive in response to envi- whereby organizations might share fundraising ronmental pressures rather than well-planned and activities, technology, accounting systems, mailing well-executed growth strategies.” The authors lists, and other aspects of their businesses. The identified four phases of the merger process: mak- Humane Society of the United States, the Doris ing the decision, planning, implementing the plan, Day Animal League and the Fund for Animals are and reviewing/evaluating. They used these phases partially merged. But mergers among nonprof- as an organizing framework to conduct a review of its are not easy. Unlike corporate mergers, which the literature on nonprofit mergers at the time and involve a few people working quietly until details to study 18 nonprofit merger transactions. Using are determined, nonprofit mergers require any information from the Council on Agency Executives and all stakeholders to be involved, which makes and United Way Services of Greater Cleveland, them more likely to fall through. A merger of two Singer and Yankey identified 39 agencies for inclu- California foundations, the Peninsula Community sion in their study. They included family & children’s Foundation and Community Foundation Silicon services, multipurpose social service centers, health Valley found itself on rocky ground; but Emmett programs, vocational programs, substance abuse D. Carson, CEO of the merged organization, programs, residential care institutions, and “oth- advised critics to give the merger time. ers.” There were more mergers than other kinds of consolidations among the study group. The TWIN CITIES CONNECTIONS authors interviewed agencies’ executive directors, board members, or both. “Authoring the Book on Mergers: How Two Interviewees indicated that 94% of transactions St. Paul Agencies Successfully Joined Their His- resulted from financial concerns. Lesser reasons for tories. Alliance for Children and Families Maga- merger/acquisition/consolidation included compat- zine, Fall 2003. Vol. 3, No. 4. ibility of missions (72%), benefit to the community (39%), effect on employees (22%) and enhance- This article describes the 2003 merger process ment of services (17%). Study conclusions: finan- between two St. Paul nonprofits, Family Service, cial forces were the major driving force, honest Inc. and Children’s Home Society of Minnesota. and clear communication was critical to a smooth The organizations had a combined history of over transaction, and staff morale was affected. 200 years of child-and-family service. The merger was successful because it was methodically carried out; it focused on their newly-combined Strom, Stephanie. “Charities Trying Mergers to mission; and it established a good working rela- Improve the Bottom Line.” New York Times, tionship between management, staff and boards. November 11, 2007. Open communication was key to the success as well. The organizations also engaged consultants www.nytimes.com/2007/11/11us/ to “smooth the edges of the merger.” Because d 11merge.html?_r=1&adxnnl=1 the services offered by the two organizations &adxnnlx=1228766733- were complementary, the “fit” was excellent, and 9NH5CuoCByQPVMP2tsXsyg

60 trust was high. “When we got stuck,” said one of Lucas, Carol and Ron Reed. “Keys to a Successful the organizations’ CEO, “we focused on where Nonprofit Merger.” Nonprofit World, May/June we were going. In the depths of our hearts we 1992, Vol. 10, No. 3. (Electronic copy) believed that we were both good and going to get better.” This case study deals with the 1987- 89 merger of Family Service of Greater Saint Paul and East Communities Family Center. A successful merger Kirkpatrick, Kevin T. “Go Ahead—Pop the Ques- is carefully planned, soberly decided, and requires tion.” Stanford Social Innovation Review, Sum- close and continuous consultation with all who mer 2007. (Electronic copy) harbor reservations toward the union, said Ron Reed of Family Service of Greater Saint Paul. A The marriage metaphor illustrates this author’s well-executed merger of two nonprofit organiza- belief that “marriages between nonprofits” tions with complementary missions, values and (i.e. mergers) would be good for the sector as strengths can achieve economies, efficiencies a whole. The unions would make the lives of and synergies that few organizations can achieve nonprofit organizations easier by reducing the alone. There are six basic keys to strengthening competition between them for financial sup- the merger process: port, legitimacy, and political power. Additionally, they could help nonprofits build public will and 1. Focus on mission motivate sustainable change in both policy and behavior. According to Guidestar, the number of 2. Create a clear vision of the new nonprofits focusing on children, youth and family organization issues (the author’s area of work) grew more than 3. Involve people who will be affected in the 250% between 1999 and 2006. He says these process nonprofits live “the single life” in the nonprofit world and consume vast resources operating 4. Strive for a win-win alliance often small operations. 5. Deal with difficult issues early and directly A number of cases illustrate Kirkpatrick’s points in this article, including recent efforts by the 6. Take time to do it well Minnesota Early Learning Design (MELD) to merge This detailed article takes the reader through the with complementary nonprofits. One of these, merger process, looking at organizational back- Parents as Teachers was an excellent fit. The arti- grounds, compatibilities and differences. It fol- cle discusses this merger in detail, noting which lows merger planning and negotiations month local funders helped underwrite its costs. by month for approximately 15 months, from the Are mergers right for every nonprofit? “Of course boards’ first conversations in November 1987 to not,” says Kirkpatrick, but the proliferation of the official union of the agencies in January 1989. nonprofits everywhere makes sustainability a more pressing and widespread concern. He cautions against merging just to survive, and adds that mergers are not a “zero-sum” game of who should close so that others can prosper. Rather the focus should be on a more holistic approach to pressing problems, requiring visionary leadership that concentrates on creating positive, sustainable change and leaves behind the parochial interest of one organization or program model over another. If that’s truly the goal of the merger, then go ahead and say, “I do.”

61 Russell, Scott. “Putting Good Will to the Test: Minnesota Council on Foundations News Nonprofits Find Mergers Can Be a Messy Busi- Archives. “Minneapolis and St. Paul United ness at Times.” MinnPost.com, June 23, 2008. Ways to Merge.” February 27, 2001.

www.minnpost.com/stories/ www.mcf.org/mcf/whatsnew/archives/ d 2008/06/23/2307/putting_good_will_to_ d Feb2001/unitedway010227.htm the_test_nonproﬁts_ﬁnd_mergers_can_ be_a_messy_business_at_times) A volunteer task force comprised of representa- tives from the St. Paul and Minneapolis United This article about the 2006 merger of the Way boards of directors recommended the cre- American Red Cross Twin Cities Chapter, as well ation of a single, regional United Way organiza- as several other well-publicized local mergers, tion. The idea was to create a new organization is offered as a “cautionary tale” with a moral: that will “provide a stronger voice and leadership that mergers are harder and take longer than for regional solutions to issues that affect local people think. Frank Forsberg, Greater Twin Cities communities.” The merged organization will have United Way (GTCUW) Senior VP for Community greater ability to leverage resources and provide Impact believes that mergers started increasing 10 innovative approaches to high-priority issues. years ago and accelerated slightly following the Other benefits include more effective coordination post-911 economic downturn. The GTCUW has of services in response to needs, a single set of supported approximately two dozen nonprofit reporting requirements for jointly-funded agency mergers since 2003 through planning and/or service providers, and a vehicle by which donors implementation grants. can support services in communities where they both live and work. In the course of the American Red Cross merger, merging administrative systems and organiza- Weinmann, Karlee. “Guiding Nonprofits to Each tional cultures (the St. Paul chapter was smaller and had a “family” feel, the Minneapolis chapter Other.” Minneapolis/St. Paul Business Journal, was larger and operated out of a fairly new head- July 11, 2008. Vol. 26, No. 5. quarters building) proved challenging. There were http://twincities.bizjournals.com/twincities/ job cuts and losses of volunteers…but important d lessons were learned. “Communication has to be stories/2008/07/14/story4.html five times what you consider normal,” said Jan McDaniel, CEO of the merged organization. MAP for Nonprofit’s innovative “Project Redesign” is the focus of this one-page story in a Twin Cities Other mergers discussed in this article are Family business publication. The project, which was Service, Inc. and the Children’s Home Society, funded for three years, is headed by Ron Reed. It Loring-Nicollet-Bethlehem Community Centers provides consulting assistance for local nonprofits and Project for Pride in Living, and the merger of that wish to merge. The interest in mergers stems five regional Girl Scout councils. from the visibility of other successful mergers, a realization that mergers can be opportunities for growth, and a reaction to a difficult economy. Those working with Project Redesign pay a fee of $2,500-10,000 (based on a number of factors), and the merger process generally takes 6-12 months. In its first year, the project exceeded its goals and is expected to continue doing so.

62 OTHER JOURNAL ARTICLES AND CASE STUDIES A 2007 evaluation found the combined organization both wealthier and wiser. One of the reasons Blum, Debra E. “All in the Family.” Chronicle of for the success was the “buy-in” from funders Philanthropy, October 13, 2005, Vol. 17, No. 1 who recognized the value of the merger and (Electronic copy) committed themselves to maintaining their funding levels after the merger. In 2003 La Piana Consulting was hired to guide two California nonprofit domestic violence groups through a merger. The Center for Domestic Burnett, Lee. “Doubling Up.” Chronicle of Phi- Violence Prevention and Sor Juana Ines were lanthropy Special Report, September 18, 2008. both located in the same county, both ran crisis Volume 20, Number 23. hotlines, and both offered counseling to people in abusive relationships. And when the financial crisis http://philanthropy.com/free/articles/v20/ hit the Silicon Valley, both faced crushing revenue d i23/23001401.html. declines. By coincidence, their executive directors resigned almost simultaneously. City officials This informative Chronicle of Philanthropy arti- raised the question of merger, which had already cle tells the story of two social services charities been on others’ minds. The groups merged to in the Portland, Maine area that merged. Youth form Community Overcoming Relationship Abuse Alternative (a child welfare charity) and Ingraham (CORA). But nothing was easy. The new organiza- (a crisis counseling and mental health therapeu- tion’s executive director likened the situation to tic facility) were both $12 million agencies that “a second marriage in which teenage kids from combined into YAI Youth Alternatives Ingraham, previous marriages are thrown together in the a $23 million organization. The new entity runs same household.” therapeutic boarding homes and offers telephone services for people in need of help, as well From the start, leaders at the smaller organization as offering child-rearing education, counseling were worried that it would be swallowed up by and psychiatric services. It was able to complete the larger one – that the partnership would be a the merger with only a slight reduction in staff “takeover,” not a merger. In response, the larger and retention of all programs during a period of organization committed itself to arranging the severe cuts in state financing. Since the merger, merger as “a union of equals.” While the larger fundraising revenue has risen 1.5% despite a organization brought some financial stability and smaller development staff. a mature infrastructure to the table, the smaller one brought expertise in dealing with the Latino population in a county with a Hispanic population Cohen, Debra Nussbaum. Merger of Jewish of 22%. The La Piana consultant who facilitated Groups Fails to Meet Expectations, Report Finds. the merger admits that it was a difficult one. It Chronicle of Philanthropy, February 17, 2005, involved two organizations dedicated to a cause Vol. 17, No, 9. (Electronic copy) that involves urgency and trauma, and it faced a “cultural divide.” The absence of executive direc- The full report is a 165-pg. book titled tors from both organizations at the start of the d Predictability to Chaos?: How Jewish merger process further added to the complexity. Leaders Reinvented Their National In fact, the consultant had to take an unusually Communal System. It is available for hands-on role of acting as interim director to both purchase from the Jerusalem Center. organizations for a period of time. Contact via e-mail at [email protected]. It is also available from Amazon.com.

63 In 1999, three major and well-established Jewish Gargulinski, Ryn. “Foundation Throws Local organizations, the Council of Jewish Federations, Charities a Financial Lifeline.” Tucson Citizen, United Israel Appeal, and United Jewish Appeal December 11, 2008. merged into a new organization, United Jewish Communities, that became the 20th century’s www.tucsoncitizen.com/ss/ largest nonprofit merger. A published report five d fromtopemails/104834.php years later reveals that the new organization has failed to live up to the goals it was established to To help charities through these difficult economic achieve. The report offers helpful guidance about times, the Community Foundation of Southern what makes a merger successful and where the Arizona has created an Economic Relief and potential pitfalls lie. Stability Fund, with a goal of strengthening nonprofits for long-term sustainability. It has seeded Foremost among those goals was to streamline the fund with $300,000 and will match donations fund raising and allow the 155 Jewish federations dollar for dollar, with a goal of $500,000 by the in the network to exert more influence over dona- end of March 2009. The Foundation is encourag- tions that they raise for Israeli causes. Monies ing nonprofits and their supporters to focus on raised by the federations support a wide range charities’ assets, missions, client bases, and ser- of social service programs in the US, Israel, and vices to identify areas of duplication. It is further abroad. Another goal was to find new ways to urging partnerships and mergers among organi- capitalize on the “desire for innovation” among zations. A problem with this approach, say some many Jewish philanthropists. According to the charities, is that partnerships are great goals in report this goal was not met because the sys- principle, but they are expensive. At present, it is tem remained entrenched in “old ways” of doing not clear if some of the $300,000 in the relief things. The end result, according to the report fund could be used to help fund partnerships. was “a new organization that met few if anyone’s expectations.” Harrington, Robert. “Arts and Culture Mergers: The report’s authors say that one reason the merger Trends, Challenges and Benefits.” CausePlanet, failed is because United Jewish Communities, like November 13, 2006. many nonprofit groups, quickly adopted a top- down corporate model which permitted pro- http://causeplanet.org/articles/article. fessional leadership to manage the agenda and d php?id=34 removed opportunities for discourse and debate. In addition, the outside consultants hired to facili- Mergers and other forms of nonprofit partner- tate the merger did not adequately understand ships have been on the rise for the past decade, the cultures of the organizations. “Organizational and particularly in the past five years, says cultures and styles were never adequately dis- Harrington. Some nonprofit sub-sectors have seen cussed,” the report continues. “The major lesson more mergers than others. Once largely confined learned is not to apply business principles in their to health and human service agencies, mergers totality to the not-for-profit world.” are now part of the art and culture sub-sector as well. Factors underlying this trend include:

s Significant decline in government funding for the arts

s Decline in corporate funding due to mergers and acquisitions in the business sector

s Natural disasters (i.e. Hurricane Katrina) that draw funds that might have gone to the arts

64 s Economic challenges that cause some shift- organizations reasoned that they served similar ing away from arts to basic needs age groups, so why compete for resources and pay extra for overhead? The new, larger organiza- s Increased pressure on schools to pass stan- tion shares payroll, bookkeeping, and databases dardized tests, reducing schools’ focus on and is in a better position to market classes and the arts other revenue-generating services to the largely middle-class clientele for those classes. The two s Aging of the population that forms organizations are also glad that they are no lon- the core audience for traditional arts ger competing for donations. One of their funders programming agrees: “I think they may be on the leading edge s Competition with other, often cheaper, of something that we will probably see more of forms of entertainment in the next 18 to 24 months…Mergers make a lot of sense.” s Public has increasingly less leisure time, but more ways to spend it Wallace, Nicole. Joining Forces to Fight Poverty. The author outlines the challenges for arts orga- Chronicle of Philanthropy, January 25, 2007, Vol. nizations that consider merging, and he recounts 19, No. 7. (Electronic copy) an example of a well-publicized nonprofit arts merger that was not a success: the merger of the Mercy Corps, an international aid and devel- Jewish Museum San Francisco and the Magnus opment organization in Portland, Oregon, has Museum. Among the most successful arts merg- merged several times in its 28-year history. It ers are those between advocacy organizations, recently merged again, this time with NetAid, a which exist to raise visibility of the arts and New York charity that engages young people as to help the arts have a deeper impact on soci- activists to raise awareness about global poverty ety (example cited: the merger of the Michigan and health concerns. This merger arose out of Association of Community Arts Agencies and joint needs by both organizations: Mercy Corps ArtServe Michigan). Other successes include arts realized that it needed to focus more on educat- organizations that have similar missions and serve ing young people about the realities of life in the similar stakeholders, but operate in different geo- developing world. At the same time, NetAid was graphic areas, such as the 2004 merger of Young seeking a way to broaden its reach and began Audiences of San Jose & Silicon Valley with Young looking for organizations that would be able to Audiences of the Bay Area to become Young help the group reach more young people without Audiences of Northern California. building a whole new network itself. The charities decided their goals were compatible, and the merger process began. NetAid’s president led the Tagami, Ty. “Two Nonprofits Team Up.” Atlanta merger process and saw it through to completion, Journal-Constitution, November 27, 2008. then stepped down from her position to pursue consulting work. www.ajc.com/services/content/print d edition/2008/11/27/evnonproﬁt.html. The consultant who helped facilitate that partnership noted that more nonprofit organizations are This short article describes the merger between showing an interest in mergers. Many, however, Senior Connections and Life Enrichment Services, are doing it too late, when they are at a point of two complementary Atlanta-area organiza- desperation, and the challenges are greater under tions that serve seniors. The former organiza- those circumstances. By contrast, the merger tion is absorbing the latter. This merger is largely noted above is an example of how merger can a result of the challenging economic times. The be a tool to help organizations expand their reach and impact.

65 WEB SURFING In 2008, The Lodestar Foundation announced that it would offer a $250,000 Collaboration Prize MAP for Nonprofits for the most effective nonprofit collaboration. In www.mapfornonprofits.org March, 2008, the Foundation announced that the award would be presented to two groups. The MAP has worked with client organizations, the Museum of Nature and Science (Dallas, TX) and corporate community, foundations and nonprofit the YMCA and JCC of Greater Toledo (Toledo, associations to build a strong Minnesota non- OH) each received checks for $125,000. profit community. MAP for Nonprofits provides high-value management consulting and services, Mission + Strategy = Social Value as well as board recruitment and training, to large, medium and small nonprofit organizations www.missionplusstrategy.com in the Twin Cities and beyond, helping nonprofit This website is the blog for Jean Butzen, a former clients to achieve their missions more effectively. nonprofit CEO who, after 25 years of leadership, The website outlines the organization’s manage- now offers consulting services on values-driven ment consulting and services, classes and work- mergers, partnerships, and management for non- shops, volunteer and board service opportunities, profits. Her blogs provide lively, experienced com- and more. mentary and advice on the merger process.

La Piana Consulting Forbes Funds & Tropman Reports www.lapiana.org www.forbesfunds.org La Piana Consulting is a nationally-known man- Under this website, one can find reports and agement consulting firm that helps nonprofits and essays that are the results of Forbes-supported foundations effectively address the strategic issues studies by the Tropman Fund for Nonprofit they face, and ultimately helps them become Research for the years 2002-2007. These are stronger and more effective. Their founder, David downloadable free of charge, and cover topics La Piana, is a leading expert on nonprofit manage- such as “Nonprofit Mergers: As Assessment of ment and governance and the author of mono- Nonprofits’ Experiences with the Merger Process” graphs, reports, article, and two “workbooks” (2007 Report #2) and “A Generous Gift: The Value that assist nonprofits with the merger process. of Nonprofit Organizations to Our Community” The firm’s research reports may be downloaded (2005 Special Essay) free of charge from the website.

Mandel Center for Nonprofit Organizations at The Lodestar Foundation Case Western University www.lodestarfoundation.org www.case.edu/mandelcenter This innovative foundation’s mission includes The Mandel Center at Case Western offers one “encourag[ing] and support[ing] collaborations, of the nation’s most fully-developed programs in consolidations, mergers and other long-term nonprofit management. It also publishes the jour- cooperative activities among nonprofits work- nal Nonprofit Management & Leadership. One ing in the same area, and [encouraging] other can search back issues of the journal and read business practices, in order to increase efficiency abstracts of selected articles. Case studies are also and eliminate duplication of efforts.” There are downloadable free of charge. numerous opportunities for in-depth reading throughout the website. One example: the website’s “Merger” link takes the reader to summaries of Representative Collaboration Grants and links for more detailed information on each.

66 APPENDIX 3 Full Bibliography

Books, Monographs, and Longer Documents

Angelica, Emil and Linda Hoskins. Fieldstone Kohm, Amelia and David La Piana. Strategic Alliance Nonprofit Guide to Forming Alli- Restructuring for Nonprofit Organizations: ances: Working Together to Achieve Mutual Mergers, Integrations, and Alliances. Praeger Goals. St. Paul, MN: Fieldstone Alliance, 2005, Press, 2003, 153 pp. 112 pp. Kretzmann, John P. and John L. McKnight. Build- Arsenault, Jane. Forging Nonprofit Alliances. ing Communities from the Inside Out: A Path San Francisco, CA: Jossey-Bass, 1998, 198 pp. Toward Finding and Mobilizing a Commu- nity’s Assets. Evanston, IL: Center for Urban Bailey, Darlyne and Kelly McNally Koney. Stra- Affairs and Policy Research, Neighborhood tegic Alliances Among Health and Human Innovations Network, Northwestern Univer- Services Organizations: From Affiliations to sity, 1993. Consolidations. Sage, Inc., 2000, 216 pp. La Piana, David. Beyond Collaboration: Strate- Davis, John Emmeus. Bridging the Organiza- gic Restructuring of Nonprofit Organizations. tional Divide: The Making of a Nonprofit San Francisco, CA: The James Irvine Founda- Merger. Burlington, VT: Burlington Associ- tion, 1997, 22 pp. ates in Community Development, LLP, 2002, 39 pp. La Piana, David. Nonprofit Mergers: The Board’s Responsibility to Consider the Unthinkable. Dickmeyer, Louise C. No Risk—No Reward: Washington, D.C.: National Center for Non- Mergers of Membership Associations and profit Boards, 1994. Nonprofits (A Handbook to Help You Prepare for the Complexity of the Process and Avoid La Piana, David. The Nonprofit Mergers Work- the Inherent Pitfalls). Andover, MN: Expert book Part I: The Leader’s Guide to Consid- Publishing, Inc., 2009. ering, Negotiating, and Executing a Merger (Updated Edition). St. Paul: Fieldstone Alli- Emenhiser, Walgren King, Joffe, Penkert. Net- ance, 2000, 240 pp. works, Mergers, & Partnerships in a Managed Care Environment. Child Welfare League of La Piana Associates. The Nonprofit Mergers America, 1998, 128 pp. Workbook Part II: Unifying the Organization After a Merger. St. Paul: Fieldstone Alliance, Haidet, Mark E., Thomas J. Kelley, and Paul D. 2004, 230 pp. plus CD-ROM. Nelson. A Legacy of Leadership and Service: A History of Family Service, Inc. (Rev. ed.), McCormick, Dan H. Nonprofit Mergers: The St. Paul,: MN, Ramsey County Historical Soci- Power of Successful Partnerships. Gaithers- ety, 2004, 213 pp. burg, MD: Aspen Publishers, 2001, 170 pp.

McLaughlin, Thomas A. Nonprofit Mergers and Alliances: A Strategic Planning Guide. New York, NY: John Wiley & Sons, 1998, 256 pp.

67 McLaughlin, Thomas A. Seven Steps to a Suc- Journal Articles and Case Studies cessful Nonprofit Merger. Washington, DC: National Center for Nonprofit Boards, 1996, Association for Enterprise Opportunity. 28 pp. “Microenterprise Mergers: Industry Trends Towards Scale” (3-part series). Association for Mattessich, Paul W. and Barbara Monsey. Col- Enterprise Opportunity (AEO), AEO Exchange, laboration: What Makes It Work: A Review Part 1: Issue 5, Jan-Mar 2002; Part 2: Issue 6, of Research Literature on Factors Influencing Apr-Jun 2002; Part 3: Issue 7, Jul-Sep 2002. Successful Collaboration. St. Paul, MN: Field- stone Alliance, 1992. “Authoring the Book on Mergers: How Two St. Paul Agencies Successfully Joined Their Mattessich, Paul W. Marta Murray-Close and Bar- Histories.” Alliance for Children and Families bara Monsey. Collaboration: What Makes It Magazine, Fall 2003. Vol. 3, No. 4. Work, 2nd Edition. St. Paul, MN: Fieldstone Alli- ance,2001, 104 pp. Blum, Debra E. “All in the Family.” Chronicle of Philanthropy, October 13, 2005, Vol. 17, No. 1. Wenger, Hilda Shirk. Motives for Mergers Among Family and Child-Serving Agencies. Bradley, Bill, Paul Jansen, and Les Silverman. “The dissertation.com, 2000, 97 pp. Nonprofit Sector’s $100 Billion Opportunity.” Harvard Business Review, May 2003, Vol. 81, Winer, Michael and Karen Ray. Collaboration No. 5, pp. 94-103. (Electronic copy) Handbook: Creating, Sustaining and Enjoy- ing the Journey. St. Paul, MN: Fieldstone Alli- Burnett, Lee. “Doubling Up.” Chronicle of Phi- ance, 1994. lanthropy Special Report, September 18, 2008. Volume 20, Number 23. Yankey, John, Amy McClellan, and Barbara Wester Jacobus. Nonprofit Strategic Alli- Butzen, Jean. “Are Nonprofit Mergers an Ethical ance Case Studies: Lessons from the Trenches. Way to Grow?” (Blog, November 26, 2007). Cleveland, OH: Mandel Center for Nonprofit Organizations, 2001, 72 pp. Canales, James, Barbara Kibbe and Natasha Terk. “One Step Beyond Strategic Planning.” Foun- Yankey, John A., Barbara Wester and David dation News and Commentary, September/ Campbell. Managing Nonprofit Mergers and October 2000, pp. 41-43. Consolidations (Chapter 23 from ‘Skills for Effective Management of Nonprofit Organi- Chronicle of Philanthropy, Live Discussion, zations’). National Association of Social Work- December 2, 2008. ers, 1998. Cohen, Debra Nussbaum. “Merger of Jewish Yankey, John A., Barbara Wester Jacobus, and Groups Fails to Meet Expectations, Report Kelly McNally Koney. Merging Nonprofit Finds.” Chronicle of Philanthropy, February 17, Organizations: The Art and Science of the 2005, Vol. 17, No, 9. Deal. Cleveland, OH: Mandel Center for Non- profit Organizations, 2001, 69 pp. Devine, Marty. “Nonprofits Ponder Increased Demands, Fewer Resources.” Alexandria Times, November 20-24, 2008; Volume 4, Number 45.

68 Dewey and Kaye. “Nonprofit Mergers: An Hiland, Mary L. “Nonprofit Mergers.” Consult- Assessment of Nonprofits’ Experiences with ing to Management, December 2003, Vol. 14, the Merger Process,” Tropman Reports, The No. 4, pp. 11-14. Forbes Funds (Tropman Fund for Nonprofit Research), November 2007. Hodgkin, Christopher. “What You Should Know About Nonprofit Mergers.” Nonprofit World, Dickey, Marilyn. “Making a Merger Go Smoothly July/August 1994, Vol. 12, No. 4. for Nonprofit Workers.” Chronicle of Philan- thropy, June 10, 2002, p. 37. Jacobs, Jerald A. “Association Mergers and Con- solidations: Strategic Considerations.” Asso- Dixon, Diane L. and Mitchell Lee Marks. “Mak- ciation Management, August 2004. Vol. 56, ing Mergers, Acquisitions, and Alliances No. 8, pp. 17-18. Work.” Health Forum Journal, November/ December 1999, Vol. 42, No. 6, pp. 30-33. Jacobs, Jerald A. “Mergers: Easier (and Harder) Than You Think.” Associations Now, July Gargulinski, Ryn. “Foundation Throws Local 2008. Charities a Financial Lifeline.” Tuscon Citizen, December 11, 2008. The James Irvine Foundation. “Strategic Solu- tions: Mergers & Acquisitions, Nonprofit Giffords, Elissa and Richard Dina. “Changing Style.” The Irvine Quarterly, Summer, 2002, Organizational Cultures: The Challenge in Vol. 2, No. 1. Forging Successful Mergers.” Administration in Social Work, 2003, pp. 69-82. Kamrad-Marrone, Susan L., Mary Ann Stabile, and Carolyn Hope Smeltzer. “Understanding Golensky, Martha and Gerald L. Deruitter. and Championing the Merger Process: Key “Merger as a Strategic Response to Govern- Leadership Roles for Successful Outcomes.” ment Contracting Pressures: A Case Study.” Nursing Administration Quarterly, June 22, Nonprofit Management and Leadership, Win- 1999, Vol. 23, No. 4, p. 47. ter, 1999, Vol. 10, No. 2, pp. 137-152. Kirkpatrick, Kevin T. “Go Ahead—Pop the Ques- Hackett, Kelly. “Essential Pre-Merger Reviews.” tion.” Stanford Social Innovation Review, Association Management, July 1997, vol. 49, Summer 2007. No. 7. Kohm, Amelia. “Cooperating to Survive and Harrington, Robert. “Arts and Culture Merg- Thrive: Innovative Enterprises Among Non- ers: Trends, Challenges and Benefits.” Cause- profit Organizations.” Nonprofit World, May/ Planet, November 13, 2006. June 1998, pp. 36-44.

Heathfield, Susan M. “Culture: Your Environ- Kohm, Amelia. “What Happens When Non- ment for People at Work.” About.com. profits Consolidate (Either Partially or All the Human Resources. Way)? Nonprofit World, May/June 2002, Vol. 20, No. 3, pp. 24-29. Haider, Donald. “Common Bonds: Two Chi- cago Nonprofit Job Training Programs Find La Piana, David. “Nonprofit Mergers: Is Your Strength and Stability in a Merger.” Stanford Organization Ready for the Road?” The Social Innovation Review, Fall 2004. Grantsmanship Center Magazine, Spring 2001.

69 Lempert, Robin. “Greater Than the Sum of its NPR All Things Considered. “Charity Merger.” Parts.” Advancing Philanthropy, March/April Reported by Noah Adams, April 18, 2000, 2005, p. 26. Hour 2.

Lieber, Penina Kessler. “Due Diligence” Respon- NPR All Things Considered. “Nonprofit Merg- sibly Investigating Alliance Partners.” Caring, ers.” Reported by Julie Grant-Cooper, WCBE Spring 1998, Vol. 14, No. 1. Reporter, July 2, 1998.

Light, Paul C. “The Risk of Too Much Charity O’Brien, John E. and Peter J. Collier. “Merger Reform.” Brookings, April 20, 2000. Problems for Human Service Agencies: A Case Study.” Administration in Social Work, 1991, Lewis, Fritz and Charles R. Chandler. “The Urge to Vol. 15, No. 3, pp. 19-31. Merge: A Common-sense Approach to Associa- tion Consolidation.” Association Management, Patrick, Georgia and Gary McCoy. “Mind Your March 1993, pp. 80-84. Merger.” Association Management, June 2003, Vol. 55, No. 6. Lucas, Carol and Ron Reed. “Keys to a Success- ful Nonprofit Merger.” Nonprofit World, May/ Prokuski, Bronislaw. “Anatomy of a Merger.” June 1992, Vol. 10, No. 3. Association Management, February 2002, Vol. 54, No. 2. MacDonald, Jeffrey. “Nonprofit Organizations Seek Strength in Mergers.” Christian Science Rocco, James E. “Keys to a Successful Nonprofit Monitor, June 5, 2006. Merger.” Nonprofit World, March/April 1992, pp. 14-19. McCormick, Dan H. “Nonprofit Mergers: Laying the Groundwork with Volunteers and Staff.” Russell, Scott. “Putting Good Will to the Test: The Grantsmanship Center Magazine, Spring Nonprofits Find Mergers Can Be a Messy Busi- 2001. ness at Times.” MinnPost.com, June 23, 2008.

McLaughlin, Thomas. “Don’t Replace, Merge: Schmid, H. “Merging Nonprofit Organizations: An Open Letter to Board Members.” The Non- Analysis of a Case Study.” Nonprofit Manage- profit Times, December 1, 2004, Vol. 18, No. ment & Leadership, 1995, Vol. 5, pp. 377-391. 23. Singer, Mark I. and John A, Yankey. “Organi- “Minneapolis and St. Paul United Ways to zational Metamorphosis: A Study of Eigh- Merge.” Minnesota Council on Foundations teen Nonprofit Mergers, Acquisitions and News Archives. February 27, 2001. Consolidations.” Nonprofit Management & Leadership, Summer 1991, Vol. 1, No. 4, pp. Moore, Jennifer. “United They Stand.” Chron- 357-369. icle of Philanthropy, January 25, 1996, pp. 1, 27-29. Strom, Stephanie. “Charities Trying Mergers to Improve the Bottom Line.” New York Times, Nadler, David A. “10 Steps to a Happy Merger.” November 11, 2007. New York Times, March 15, 1998.

70 Tagami, Ty. “Two Nonprofits Team Up.” Atlanta Journal-Constitution, November 27, 2008.

“Two California nonprofits to Merge to Coun- ter Arts Cutbacks.” Philanthropy News Digest, June 29, 2004, Vol. 10, No. 26.

“United Ways Merge in Chicago Area.” In Brief: Managing, Chronicle of Philanthropy, June 26, 2003, Vol. 15, No. 18, p. 36.

Verrett-Carter, Calvin. “Piecing Together a Merger.” Board Member, November/Decem- ber 2002, vol. 11, No. 10.

Wallace, Nicole. Joining Forces to Fight Poverty. Chronicle of Philanthropy, January 25, 2007, Vol. 19, No. 7.

Weinmann, Karlee. “Guiding Nonprofits to Each Other.” Minneapolis/St. Paul Business Journal, July 11, 2008, Vol. 26, No. 5.